>> is going to invite p.m. in hong kong. ivan update of the top stories. think of korea has left policy rates unchanged. it kept the benchmark at a record low as inflation upset concerns over a political scandal. the fed signaled rates may rise fairly soon to keep the economy from overheating. smaller chinese banks sold smaller amounts of short-term debt this month. before roles that would make it harder to do so. they sold $233 million of negotiable certificates. even as deals jumped to record highs. that is the first since they were first allowed in 2013. nissan announced changes at the

top. from co-ceo post but will stay on as chairman after april 1. nissan says the move was made on the recommendation of the ceo and he will not seek a renewal of his mandate as chairman in june. global news. 24 hours a day. powered by more than 2600 journalists and analysts in more than 120 countries. you are watching bloomberg. let's get a check of markets in play. region is still in the negative for the first time this week. the hung saying is down .05%. ♪ cory: i'm cory johnson, and this is "bloomberg technology."

coming up tesla pops the hood, reporting fourth-quarter loss amidst falling vehicle sales. plus, a company beating intel at its own semi conductor game. our exclusive interview with the ceo. at theestor concerns latest stop in the snap ipo roadshow. first to our lead. tesla shares climbing after-hours as the company reassures investors it's hyped products remain on schedule. elon musk says the production of the solar roof is on track for the of 2017. second half they are sticking to their guns, planning to deliver 50,000 vehicles before then. in the first half of this year. the big question, how will the acquisition of solarcity impact this company's bottom line and cash margins? joining us, chief investment officer of tigris financial partners, and our guest host, michael wolff.

let me start with you. the first thing i looked at for this quarter, i was surprised to see that cash was in a reasonably strong position, but the cash flow burn of nearly $1 billion is the worst tesla has ever suffered. >> i really don't think it is so much of a concern, because they are in the capital investment mode, because they are still ramping up the production of the model 3, are going to be building more giga factories, and ramping up the production of the solar shingle. this is a capital investment story, if you believe in the story, you want to see them invest capital into the country. cory: right, but -- i'm not good at math, but if they've got $3 billion and they earned $1.25 billion, this is not a pretty story. >> they are probably going to go back to the capital markets again sometime between the

spring and summer, as they have for the past two years, because manufacturing cars is capital-intensive, and this is a company that is ramping up the production of the next model, the model three. they are still building up their dealer network, even though that is not all that capital-intensive, and they are ramping up the production of the new solar shingles. cory: talk about what you have seen in this quarter for tesla. >> the questions are going to be how well integrated is the solarcity, and what are the benefits from the integration? are they going to be able to sell more of the shingles? are they going to get back costs? the second thing is, some of the other services they are talking about, whether it is right sharing or autopilot, how quickly are those going to roll out? that is part of what people are looking for, not just the equipment of moving the metal, but also other services that will be internet-based and

technology-based. cory: ivan, what is the biggest risk in the stock? it had a great run. you look at the price in the last year, it is not as exciting as the last six months, or even three months. what do you think the preeminent risk is for this business? ivan: that there would be a softness in sales for the model three and an overall softness in all the vehicles. the risk is the public stops buying teslas, but so far the demand has been extremely strong and the delivery amounts have been hampered production and not by demand. cory: let me push back on that. in the last seven quarters, four of them have seen substantial decline in revenue from vehicles sold. it seems the model s is still selling, but they sold fewer in the fourth quarter than they did in the third, for example. ivan: i think production and demand is still strong, and there is still anticipation for

the model 3. the model 3 will be a game changer. it moves them from a niche high and carmaker, to more of a mainstream carmaker. the number of model 3's projected will exceed the sales of the s and x together. >> the jury is still out as to whether or not they can sell enough model 3's to be profitable. they have been a lecture he car, but going forward the question is whether or not they can enter into the mass market, especially now that the deal makers in the longer term are going to be in this business big time also. cory: they have lost money on every sale. if they have the same net margins for the model 3 and for the model s, i suggest that they make more than one car. making a lot of cars will be bad news, not good news. >> that math is not correct. they do not lose money on every car. cory: sure they do.

>> if you look at it, it's not like the cars sell for $80,000 and cost $84,000 to make. they have a gross margin of over 22%. cory: there are other costs, r&d, sg&a. >> but that is capital investment. they're not losing money on the sales of the cars. the gross margin on automakers like ford and gm are trying to get to 10%. the gross margin on retailers like autonation is also about 10%. you put that together and it is 20%. tesla is actually exceeding that because they are both the manufacturer and the retailer. they have a growth margin on the sale of the car of 22%. the losses are coming from the capital investment that they are investing in the buildout of each model line and now the model 3, and the buildout of the solarcity shingles. cory: to play devil's advocate,

as you mentioned, the model is very different in terms of who owns the dealers, and the gross margin is affected by that, but the operating margins, whether it is rmb, whether it is marketing costs, whether it is sg&a -- we will take these accounting discussions to another day. michael, when you look at this company, are you inspired by what the company makes, or are you discouraged by their free cash flow losses and operating profit losses? >> the big concerned that -- concern that anybody should have around this company is whether or not they will be able to long-term charge a premium for their vehicles, and whether or not, as they spin production, -- expands production, they are going to have enough margin in each vehicle to make money, once they take account their capital investments as well as their selling costs. cory: ivan, let me give you the

last word. there is so much to chew on this thing. >> as i am saying, if they are losing money on the actual sale of the car, where the cost of goods to produce the car was greater than the sale price, that would be bad, but i think it is positive that they are investing in r&d, marketing, the factory, and the giga factory, because the biggest constraint of the electric car is battery technology, and they have invested in a number of technologies such as battery technology, aluminum welding technology. so if you look at this wrapup, it is not unusual for a company to invest money, especially a capital-intensive business like auto manufacturing, and not make money for a number of years, but the demand there is still strong for the car. i think there is not going to be competition between other electric cars. i think the competition will be between electric cars and gas cars because tesla is not really an electric car. it is a high-performance luxury car that happens to have electric drivetrain.

so i think people looking at the performance and luxury and technology features is what's driving the purchase. cory: thank you very much. stay with us, because we got lots more to cover. michael, glad you are here. staying on earnings, hp reported sales past the estimates, suggesting analysts were wrong again. demand for printers and computers helped drive the company's growth and sales a little bit. trading revenues of just 3% on a year-by-year basis. $213 billion for the first quarter. profit for the current quarter again in line with analyst estimates. coming up, an exclusive interview with the arm holding ceo, a company beating intel in the semi conductor market. this is bloomberg. ♪

cory: in 2011, steve jobs presented as city council of cupertino california a plan for a new ring-shaped campus, the last plan before he died. the giant facility is 2.9 million square feet. that is where apple will be moving. look at that thing. the opening date had been set for 2015, but apple faced that it overruns and delays. it costs about $5 billion. that's just an estimate, apple has never given us a dollar amount. there is a 1000 seat auditorium in the building which will be named after steve jobs himself. apple is winging itself from intel, developing their own ships for mac laptops, no longer intel, but arm holdings. the company license their chip architecture to many companies, apple and samsung among them.

joining us right now is the ceo of arm holdings, simon segars. thanks for coming by. how is it different under softbank? simon: in some ways it is not very different at all. we are developing technology for all sorts of devices, from smartphones to washing machines. in a lot of ways, it is business as usual. cory: you said in some ways, in a lot of ways, what about the other ways, what is different? simon: being part of a public company, we are able to think in a much longer term about investments that we make in new, emerging trends for technology, how they are being used, and spend more time thinking about long-term strategy than we did before. so it is business as usual in terms of execution, but in parallel with that, we are thinking decades out in terms of

how people will use technology and what that will mean. cory: softbank has announced the vision fund, which got a lot of attention from president trump. president-elect trump took notice of it and even took credit for it. i wonder what that means for arm. does arm end up working with other semi conductor firms? or semiconductor investments? you -- the relationship relationship? simon: there are a whole number of silos they have, and typically those investments are things that have grown the business as a whole. so my expectation is that money will be put to work in a fund that will return value for its investors in it. there will be technology around the kinds of things we do. cory: you guys have really captured the tiger by the tail when it comes to smartphones. you have had great success as that business has really grown. what do you see happening to the smartphone business right now? simon: from a volume

perspective of handsets, the growth rates have tailed off, but there is still a lot of innovation going on with handsets. computer performance is going up year after year. we are a few years away from having 5g technology. that will enable much higher data rates coming into your handsets. cory: what is your expectation of timing there? simon: probably 2020 or 2021. before that is a mainstream technology. the below starting trials much earlier than that. i think that will ignite new ways in which people are using phones, new applications, and that will keep the whole industry innovating. cory: as the business grows, do you expect to see -- intel, for example, made so much of their business around the internet of things, and i wonder if you see that is a necessary thing to jump start the cycle again. we are seeing declining tablet sales, longer periods of time between the refresh of the smartphone. i wonder if there is a new driver on the horizon, from your

perspective. simon: when i talk to the ceo's of semi conductor companies we work with, many are looking at the growth of the semi conductor content in cars. at any moment in time, there are industries maturing, other things taking off. right now, those sectors stand out as the ones driving innovation and potential for new revenue growth. cory: looking beyond that, talk about the relationship with apple and what it is like to work with a company like that. simon: with any successful company, your licensees are very demanding on the technology, want you to keep executing, want to keep investing in their roadmap. we have many customers like that. cory: when you look at the plans for intel -- and i keep mentioning them because i am so focused on the company -- but when i look at their plans, for capital expenditures and

look at what they are building going down to unimaginably thin wafer sizes and so on, do you imagine that is your competition? because they are able to drive those dollars into that business? simon: intel is a significant customer of ours, and we are working with them on employing some of that advanced manufacturing technology. so other licensees can go manufacturer in the process. we have been working with them for some time on that. the overall semi conductor industry is pushing forward on dairy -- very advanced geometries. that will enable more performance, better energy efficiency so we can have more powerful devices. cory: when we look at those drivers and things, the other company is looms alarm. it is amazing that you have grown to where you are. qualcomm is such a big company, but it seems to me that -- although for so many years they have fought off antitrust concerns. they are facing antitrust challenges across all geographies. do you think qualcomm has been a fair player when it comes to the way they have licensed their

technology and worked with their customers? simon: i don't think i can comment on whether they have done that fairly or not. what i have seen having worked with them in a long time, they have invested a lot in technology r&d, invested a lot to bring these wireless technologies to the market. up to them how they are going to monetize it. you can't fault them for the amount of r&d spending. cory: great stuff. simon segars, thank you very much. coming up, net neutrality rollbacks continue to attract attention. what could it mean for tech titans? this is bloomberg. ♪

cory: verizon is thinking about 5g. we were just talking about that. the nation's largest wireless carrier will start testing 5g service in 11 markets in the first half of this year. those faster connections will help verizon offer interest

-- internet speeds competitive with cable tv. qualcomm, intel, and arm are all looking into that business, expected to invest $20 billion in the business. all right, the new republican majority in the u.s. could make big changes in net neutrality laws. the rules block internet service providers from slowing traffic. the net neutrality rule was opposed by the fcc's new chairman, ajit pai. he is been a longtime critic of the rulers been on the show many times talking about that. but the implications are massive, or could be. michael wolff is still with us. michael, every time we report on this and try to learn more, i get inundated with people on twitter and so on saying, you guys don't know anything about this. you are completely wrong. it is confusing, i think, what this means. have you -- give me your metaphor for idiots like me. michael: i think the way to think about this, typically when you have deregulation, it leads to innovation. the irony here is that

deregulation could squelch innovation. here's why. isp's could throttle back on traffic or charge some of the companies that are coming onto the web, so you would see new companies -- like there is a company called next dr, were -- or some of the new e sports providers, or companies like snap. they would not have made it in an environment where they had to pay to be carried on the pipes of the isp's. the biggest companies -- netflix, google, others can afford to pay for their position. this does put a challenge on innovation in the technology business. cory: the rich call for regulations, the people call for protections, right? different sides of the same coin. i wonder, when you look at these, are these rules? you might as well stick with the

highway metaphor, the width of the road does help innovation. it sounds like you are saying the same thing is true in terms of free access to the pipes. but doesn't that put a burden there for the provider of the pipes, of the isp's, of the verizons and at&t's of the world? michael: the providers of the pipes have the ability to sell other services, they have been able to increase their pricing. they have been able to provide more bandwidth. so the challenge is going to be, can they keep up with expanding bandwidth, and can they do so in a way that maintains a free and open internet. interestingly, the largest technology companies who don't have anything to worry about are also for that neutrality. they are against any changes, because they want to see innovation. ultimately, there is one thing the legislation will say, which is you can charge everybody. the other side of it is what the

isp's are going to do. i believe the isp's are not going to try to throttle traffic or charge companies, because they have a vested interest, and they are also having a lot of innovation. and don't want to just bet on the most important companies of the internet today. they want to bet on the new wave of companies. cory: is this conversation academic because we will have republican control over the fcc, whether we like it or not? michael: i don't think it is academic, because it does not come down to what is mission will say, but what the smallest companies will be able to do. cory: he will stay with us for the rest of the stuff that's show. we are just moments away from the start of tesla's latest earnings call. what is elon musk going to say? we will tell you in a little bit. also, we have a command on the bloomberg terminal called tv .

you can watch us live. you can also go back and see previous interviews. you can even become part of the conversation by sending us instant messages during the show. distract me if you've got a bloomberg terminal. this is bloomberg. ♪

>> is 1:30 p.m. in hong kong. i have an update of the top stories to president trump is delaying their release of his revamped immigration plan until next week. his original executive order which temporarily banned the entry of people from seven was the majority nations caused confusion at u.s. airports, triggered protests, was blocked by federal courts. the pboc has been adding funds to its operations. those moves are said to be in addition to his usual open market operation. liquidity has been tightening recently. the money market rates are rising as the pboc mops up cash. earnings out of

australia. crown resorts showed a profit of 2070 $6 million. crown also announced a share my back. another companies on 8% drop in first percent earning. the airline has a 90% hedge on oil consumption for the rest of the year. >> we always make sure that we have protection going forward. hedged on our own conception of the rest of this financial year. maintain our do is flexibility and adaptability depending on conditions out there. >> global news. 24 hours a day. powered by more than 2600 journalists and analysts in more than 120 countries. you are watching bloomberg. but to the check out how markets are doing in the asia is a big. >> not very well. we did have minutes coming

through from washington on wednesday. the word on that s&p 500. you are seeing this rally that we have been seeing in asian equity markets dissipate somewhat. looking at hong kong, it is off by a quarter of 1%. property developers are very well supported. signs that property developers will continue to see profits even though we are seeing an attempt to curb property prices in china and hong kong. australia, you see that a sx 200 close lower. have a look at korea. you have hanjin shipping down by almost 59% there. the bank of korea leaving rates on hold there as an ounce. they said it is very unlikely the u.s. would label korea a currency manipulator. the nikkei is down by a quarter of 1% in very late trade.

having a look at southeast asia, we are seeing mixed moving coming through on those markets. we'll be live from london at the top of the hour. this is bloomberg. ♪ cory: this is "bloomberg technology." i'm cory johnson. tesla shares trading up in after-hours. ceo elon musk is promising that the much-hyped mass-market model 3 is on track not just for initial production in july, but for volume production in september, q3. let's focus on the solar side of the business. this is the first report that focuses on the solarcity acquisition. michael wolff is still with us, mark joins us. mark, solarcity was called solar because it was going nuclear in terms of burning through cash. what is the impact that these companies, both cash burners, are together?

mark: it seems like they are focused on trying to get solarcity cash flow positive. cory: solarcity said that before, and the burn got worse. mark: what they are saying now is solarcity contributed $77 million to tesla's bottom line for the quarter. cory: in terms of operating profit? mark: no, just in cash. i think what they want to do is get the cost down significantly, because they see a lot of headwinds in the solar installation business. utilities are pushing back in terms of offering incentives. a tax incentive is going to roll off in a couple years. so solarcity is preparing for those losses. cory: michael, when you have seen every company left, right, and center face plant, it is surprising to see an acquisition, especially when the ceo of the acquiring company is the largest shareholder of the acquired company.

michael: it was a shotgun marriage in a lot of ways. the fundamental question about solarcity is one of price versus performance. which is, can the solar shingles, a, do they perform better than other solar panels, and can the same type of single be produced somewhere else, like china? and produced much cheaper. we have already seen china take the lead on producing inexpensive solar panels. so from my perspective, the question is -- the existential question is whether or not this company continues to have a superior product that people will pay for. cory: indeed. when someone is willing to sell you a dollar for $.50, it is good to be the buyer, not always the seller. do you have solar at your home back east? michael: i don't. cory: i put solar on my house in the bay area because it was so cheap and there were fantastic subsidies available. but to that point, mark, the subsidies may not be available under the trump administration.

mark: that is unclear. some think the subsidies of the federal level will stay there, because they eventually rolloff overtime. but at the state level you're seeing a lot of pushback and utilities offering subsidies to folks who want rooftop solar on their homes. cory: to that, can tesla change its business model? it is the same management, right? mark: i think there are focused on going from a model where they leased solar systems to where they get a revenue drip overtime to where they sell the systems for cash, and that gives them a lot more revenue upfront. they talked a bit about that in their earnings release this afternoon, that they are transitioning to that sort of model. they doubled percentagewise the number of solar systems they sold for cash. cory: i should point out some breaking news on tesla, the cfo

of tesla appear and we is -- apparently is leaving. this is a critical time for the company. the former -- cfo jason wheeler leaving tesla. the former cfo will come back, we don't know how long, but that is a big change. michael, when a cfo leaves a company, it is going from a critical position where it is making 50,000 cars to where it is expected to make 10 times that over the next couple of years. that is a pretty big change. what is your reaction? michael: i don't know the specifics, but a lot of times it means tightening up operating performance and specifically focusing on margin. usually, that is one of the reasons why people make this change, especially when you are going back to the previous cfo. so i think this is what the earlier conversations were about today, margins. are these guys going to lose money on every car they sell, or is this going to be a business where they truly are able to

charge a premium and or money? - earn money? cory: obviously they have not made a dime yet, but we wish them luck. mark, thank you for walking all the way across the newsroom over here to the tv set. hard work indeed. also, fitbit. revenue was down 19% year-over-year. shares trading up -- i don't know what that means, but in after-hours they turned down. a reporter joins us. she covers fitbit or us. tell me about the quarter, what does it say? reporter: the shares are a little changed because fitbit already dropped the bomb earlier last month when they pre-announced they were going to miss earnings, would be cutting 6% of the workforce. as he said, revenue dropped almost 20%. they already had the bar set very low, but they barely met those low expectations and missed on some metrics as well,

and their outlook was not pretty. cory: they decline in sales here, but they still seem to command a lot of market share. michael, when you see a company like this where sales are down, absolutely, but margins are still very strong, competitors are leading the space, maybe leaving them more runway, i wonder what you make of that when you look at this business with declining revenues but sustainable margins. and competitors falling away. michael: the product is superior because it is simple, and people want to use it because it is simple. second of all, like other companies, they need innovation. when they come out with a new product, they give consumers a signal that it is time to buy. so i do expect as the other competitors have gone away, as the more expensive wearables are not as interesting to consumers,

i think this company is going to continue to grow and go back to a growth trajectory. cory: selena, are you sensing that optimism? reporter: the call is still ongoing. james park is as optimistic as ever. as michael mentioned, they need to come out with new products. even though the product is simple, q4 really showed that consumers are looking for something more sophisticated, and that is why they are focusing on acquisitions of vector smart watch so they can come out with a new product to generate more demand. another interesting part was james park again emphasized his push for digital health strategy. they want to continue to integrate into the health care community. he gave an example of their data being fed into glucose monitors. he definitely wants to get more revenue from those types of partnerships. cory: we cannot be more sophisticated. we got michael wolff, selina wang, pretty sophisticated.

thank you. we appreciate it. square out with earnings after the bell. the company topped estimates after the fourth quarter. we will be sitting down with square's sarah friar, not our sarah frier, on thursday. catch it right here. coming up, $30 billion in gaming acquisitions last year alone. 30 billion. what can we expect in 2017? we will look into the gaming investment space. this is bloomberg. ♪

cory: the gaming industry is gearing up for next week's developers conference, a big deal for the business, a big business. $30 billion last year in mergers, acquisitions, and investments, and investors looking for more this time around.

joining us right now the general partner at canaan partners. glad to see you. can you explain to me how this business works on the app side? i don't really understand the business model. it's my understanding that apps are a crummy business model, but they worked on this marvel game that my kids loved. i wonder how does that business work? let's do a unit breakdown. you sell this to whom and for what? guest: at command, we have been looking at shifts at the platform level. the platform level is a shift like facebook did that will drive massive amounts of downloads and app installs. in the case of kabam, the key we unlocked was going around and getting these licenses for ip like we did with marble, and -- marvel and likely will be with transformers in the

springtime. that is going to be the draw that pulls in app installs. from there, it is all about a good game. that is also highly monetize will. cory: in the same way that tetris is not about a license, it's got to be a good game. guest: right. it is about building a good game, but it is not just enough. that's why you have seen a lot of game companies fail. they have not had that reason why people would download. at the same time, it's a good game that has longevity to it. there are multiple levels within the game that keep people coming back and coming back and coming back. so it is about the install and the longevity. so you get the install, they love the wolverine, they love the hulk, and they download the game. but i wonder, back to unit costs, where does the revenue come from, how does repeat revenue happen?

what about the license fee? maha: that is the key to building a great game. it really is about unlocking the monetize will units. in their case, it is about the virtual goods. in most cases, it is about virtual goods. that is why you see game is by far being the largest revenue driver within the app store for apple. cory: is it also a business where you have 5% of the revenues paying 90% of the revenues? -- 5% of the users paying 90% of the revenues? maha: yes. there are few consumer media companies that don't generate their business from that top 10%, 20%. we focus on that at kabam. most gaming companies do that. i think that you will see that in our switch to the next what form, virtual reality. cory: i want to meet the person who is spending $50,000 a year playing the kim kardashian game. i sort of want to meet that person. [laughter] that person exists somewhere.

but to that point, what is the special sauce? if that's all it is, it's not very special. maha: it is very special because some of these licenses are extremely valuable. in the marvel case, obviously. in the transformer case, they obviously are as well. cory: and you have blocked it down across all games. guests: kabam has locked that down across certain ip within marble and transformers. on the other hand, there are fantastic games that have been developed that don't have third party ip and can be incredibly valuable. it is just that right now there is -- cory: candy crush? maha: exactly. there is a huge concentration within the gaming community, and they have locked that down in the app store. it is difficult to penetrate that now, because games are such a competitive ad sales market. it is highly expensive to buy those installs now. cory: from your role as a venture capitalist, you find these guys, you make investments with them, you help them grow the company.

you help the not throw it up, hopefully. how do you try to find other investments of this sort? maha: gaming is an incredibly difficult market. i will tell you, the kabam story was one that was not short. it was a story inside a story inside a story inside a pivot. the relationship with the entrepreneur was incredibly important. the level of trust that we had with the oxford or who you have had on many time was, frankly, a key part in continuing on with the company until they reached that success point, which they did. in gaming generally, it is incredibly difficult from the get go to predict a success, which is why in most cases companies only get venture financed once they have reached a success metric. cory: it is a hit driven business. guests: unlike the movie business, it is not one that dies off after a weekend of success. it can continue for years, like

kabam. cory: do you need an interim business to spray and pray, lots of releases because you don't know which ones will take, or do you have to stick with a couple of games to really make sure they are good, because they need to be better than the average game? maha: that is what has changed in the market. the app store has become concentrated in congested. really you need those big franchises, marvel, candy crush. top cory: ones in the 10. kardashians? maha: whatever. they had stayed in the top 10 for years now. it is about building the megahit, not assuming you can build 10 ok hits, because you can't afford anymore. cory: because development costs have gotten high? maha: because development costs and install costs have gotten high.

that is why the leverage of a third-party ip can come into play. to artificially bump you up in terms of app installs, because that marvel property, that transformers property is so exciting for users. cory: which suggest marketing is why. great stuff, maha. always a pleasure. canaan partners. coming up, snap continues its roadshow, making the case to investors that the stocks are a good bet despite the valuation. posted street reacting. we will call you. this is bloomberg. ♪

cory: tesla's earning call is ongoing. elon musk announcing the surprise that cfo jason wheeler is leaving the company. here's what he says. elon: i would like to announce that our cfo, jason wheeler, has

decided to leave tesla in april -- so at the end of next month -- to pursue opportunities in public policy. jason will be replaced by a tesla's first cfo who worked for the company for more than seven years before, stepping away in 2015. cory: wheeler is stepping out to pursue public policy projects. staying with social media, snapchat's parent company, snap, in new york, the investment roadshow continuing tomorrow. investors asking questions about growth amid the rivalry with facebook and facebook's instagram. still with us, michael wolff knows the media business quite member offormer board yahoo! and president of mtv networks. michael, this is a negative gross margin business. customer growth is slowing dramatically, and yet they are

going at an extraordinarily high valuation compared to the s&p 500. these guys are trying to go 17 times sales with no profit. michael: there are three big questions about snap. first of all, are they going to expand their user base beyond millennials, because it is very much a millennial thing right now. second of all, how will they defend against their competitors, specifically facebook, cloning or copying some of their features? third of all, are they going to be able to find revenue that goes beyond advertising on discover? i am upbeat about what they could do. on expanding beyond millennials, is like all these companies -- facebook began with a small core of college students. i think snapchat will be able to dramatically expand beyond those core millennials. it's not just 18-year-olds that will use it, but lots of other people. in terms of their ability to

compete with facebook, instagram, they are copying whatsapp, a lot of the same things, but nobody is going to use those companies' filters. they are unique to what you can do on snapchat. third of all, revenue, they are showing they have revenue. they have sponsored filters. there is a lot more on the site. also, they can and a lot more services. their chief revenue officer jeff lucas is incredibly talented. we worked together at mtv. i have a lot of confidence that this is a business and franchise that will continue to grow. cory: 30 seconds left, michael, but how important is youth advertising with today's youth, if you will, does not attach to a brand the way they did in earlier generations? michael: you still need to reach them. you need to get them to make decisions about everything from what video games they would download to what movies they will say.

they may not be as brand focused, but they are focused around what they are going to do, and they are extremely valuable to advertisers because the question is not just what they are worth to you today, but what they are worth to you 1500 days from now when they are going to be making other purchases, like buying a car. i think there are very few places where you can reach millennials like this, and snapchat is in the unique position to do so. cory: michael wolf, thank you very much. one last thing, sticking with social media, instagram announcing another update. the photo-sharing social network let's users put photo and video on a single post. it is a slideshow, or just a bunch of pictures they go in a single post, kind of like stories, a little different from stories. kind of like snapchat, a little different from snapchat.

it is just a new feature from instagram. check me out on instagram. i'm on twitter as well. tomorrow, you've got to check out sarah frier, the square cfo. this is bloomberg. ♪

anna:? how soon is fairly soon? draining the bonus pool. barclays is said to cut investment bank a outs for a third year. and the road to acquisition. we speak with theresa may about jobs as the carmakers position take over assets. earnings out now. ♪ a warm welcome to "bloomberg daybreak:europe."