the president also attacked democrats for not supporting his agenda. during his state of the union address they "sat there stone cold, no smiles, no applause." former massachusetts governor and republican presidential nominee mitt romney is fueling speculation that he may step back into state politics. in a tree, he said he plans to announce on february 15 whether he will be making run for the utah senate seat that will soon be vacated by orrin hatch. a u.s. official dealing with north korean policies says tensions over pyongyang's nuclear program are not close to reaching military confrontation. u.s. special representative for north korea policy spoke at a briefing in tokyo today. >> our policy is based on putting pressure on, as well as leaving the door open for dialogue.

i think that has been enunciated clearly by secretary tillerson. mark: he says while all options, including military force, remain on the table, he is hoping to have edible negotiations between the two sides. it came after the two koreas held dialogue over the upcoming winter olympics. los angeles authorities say a 12-year-old female is in custody in connection with a school suiting that left two students hospitalized, one in critical condition. three others who were not wounded suffered minor injuries. lieutenant chris ramirez says police received a call at 9:00 local time this morning. victims,ocated a few they also located the suspect, who they quickly took into custody. those students were transported to a local hospital, where they are currently under treatment.

said there isies no further threat at the school. global news 24 hours a day powered by over 2700 journalists and analysts in over 120 countries. i'm mark crumpton, this is bloomberg. ♪ julia: live from bloomberg world headquarters in new york, i'm julia chatterley. scarlet: i'm scarlet fu. joe: on joe weisenthal. julia: we're 30 minutes away from the close of trading. stocks in the red. 30 year yield now above 3%. joe: what'd you miss? scarlet: investors love it when a plaintiff together. get ready for the 18 to get center stage. eam to take center stage.

amazon already announced it had its best holiday season ever. how will its cloud services perform to while investors? concerns about weak demand for the iphone x have been rolling. they have been facing backlash after slowing down older models. julia: what'd you miss? yields keep on climbing. the fed year yield is up 3%. -- tenure your is high-speed the 10 year yield is high-speed. chieferg intelligence joins us from princeton. great to have you with us. i feel like we have been talking about why bond yields on tire for so long. when they do happen, we get nervous. >> i think it is a good data. it's the idea that if the federal reserve is going to hike

three times this year, once next year, that's not enough. maybe they are behind the curve. the surprise is not so much that we are at 275 yields on 10 year, it's the curve has steepened. that's the question i keep getting. how can they keep steepening when the fed is still hiking and we have had relatively low inflation? joe: when you say behind the curve, who is behind the curve? is it that the market is having to reprice to look at a more realistic outlook, or the fed behind the curve in terms of what it will have to do for the real economy? which one needs to catch up to what? >> i think inflation and growth prospects are better than people thought. with the federal reserve on this modest path of hiking, they are behind the curve in the idea that there could be more inflation to come. when you see things like labor

cost data that we saw this morning. when you look at the service sector, wage increase is likely to come and passed through to consumers. those are things that are worrying people. a lot of risk is being taken out of 10 year treasuries in that part of the curve. that's the part of the curve that has underperformed. when you look at the two tens curve, that has steepened. when you look at things like the five-year versus 30 year curve. the long end, even though it is 3%, it has done better in relative terms than the five-year or tenure -- 10 year. julia: there were a lot of analysts that were saying we could see an inversion of the yield curve by the halfway point of this year. i think a lot of people, strategists or those in the market just cap been caught off -- just have been caught offside. >> i do think the consensus trade was for curves to continue

to flatten. that doesn't mean they are wrong. it is possible this is a pullback, and ultimately we wind up getting additional flattening going forward. i think that's especially true if you get expectations for a more aggressive set for 2019. we are not pricing for much of many fed moves in 2019. we start thinking about three or four next year, to your notes can wind up moving a lot -- two-year notes can wind up moving a lot. julia: this could all change it one day, what level should we be watching it? tenure, there is not up -- on the 10 year, there's not a lot of speculation. there's not a lot of levels. i suspect we are going into a new range. one of the things ten year treasuries often do is go from one range to another at a sharp

move over just a few days. then they stay there for long periods of time. scarlet: the wall street banks have been forecasting that there will be this big shift from tension into fixed-income assets from equities, especially in light of the rallies in equities. this is not exactly playing out at the moment. is it because returns on bonds are still too low? >> there are technical reasons for that. when you have low bond yields, like we do now, the cost of liabilities go up. what happens is that trade only happens if you get funded status 100.ons close to they are now at 85%, plus or minus a bit. you still have a long way to go to get the pension status up to see that rotation. bloomberg intelligence chief u.s. interest-rate strategist, thank you so much.

we are keeping an i on all of the different earnings from companies. that a team is doing reports. facebook reported yesterday. there was weakness in the tech names before the other big companies report. joe: amazon diving 4% into the close, something to keep an eye on. julia: real nervousness heading towards those numbers. 20 minutes away, we will break down those numbers and give you an analysis. plenty more to come. from new york, this is bloomberg. ♪

♪ julia: what'd you miss? the s&pcks dominated 500 in 2017.

2018 may be a different story. reclassification of some of the banks and a harsher political regulatory and tax environment could see it lose momentum. let's bring in chief equity strategist for bloomberg intelligence. >> the tech sector is interesting. it is one sector that faces more difficult times in the years ahead. it at phenomenal growth in 2017. quarters of the year, it averaged 30% earnings growth. expected to double in the first quarter, that will slow down in the year ahead. that is unlike the rest of the index. they are going to accelerate. scarlet: that highlights it nicely. pull this chart up. the white bars show the s&p 500 year and year earnings growth. 2017 is right here.

2018, you start to see the tech companies lose some momentum compared to the broader index. >> the index is accelerating growth, we are finding out how much as earnings season progresses. those are moving higher while tech estimates are slower. on top of the fact that tech faces the most difficult comparisons. it isn't that tech is facing a slowdown, you cannot keep up the extraordinary pace of growth for that long. joe: another way you are looking at tech earnings is new tech human motive eps growth. what are we looking at here? >> this tells you the story of the loss of a few of things. tech sector is going to lose two bank stocks by september of this year. they are going to move to a new communications sector that they are designing to pop up at the end of september.

replaces the old telecom center. the current telecom constituents are going to be joined by the media companies from consumer discretionary. a few of the online travel services, as well as facebook, alphabet, and aiming stocks from tech to perform this new sector called communication. joe: how is this going to affect managers? the s&p 500 can do whatever it wants, we are going to's sti category -- we're still going to categorizing tech. or will there be a shifting to realign with the new index subsets? >> if you are an active benchmarked manager, you have to reconsider what the tech sector looks like. new tech sector doesn't include these gigantic software services. become a microsoft much bigger share of the sector with the loss of facebook and google. if you are an etf investor, some

of the companies have disclosed that what they will do is give you shares of the new sector in of -- thisr the loss is really complicated. we are underestimating how complicated it is. these companies have been very diverse for very long times. how they are classified as a portfolio manager who has been benchmarking and considering sector strategy, it is very important for me. i run models of how these behave overtime. without facebook and also that, the tech sector earning stream looks different. that chart showed you that without facebook and alphabet, the earnings growth will be much slower. these are some of the fastest-growing companies in tech, they're gone by the end of this year. julia: what about the u.s. dollar and the impact it is having? the tech sector compared to the s&p 500 has grown significantly

greater overseas. >> the dollar should help, in theory. other things are impacting tech going forward. lower value of the dollar makes tech company earnings look better. unfortunately, more than offsetting that is the fact that tech companies old the most cash overseas and suddenly have to pay taxes on it. also had among the lowest tax rates in the s&p 500 in the last few years. there tech rates are going to go higher. scarlet: when you look at the weakness in at least tech names, people are pricing in what you are saying, or is it just anticipation before earnings? is a short-term or longer-term? >> i don't think there is longer-term nervousness in the tech sector yet. we are starting to pay attention to the issues as time goes on. so far, tech is still outperforming. it is overcoming some of these issues. by the time you get to first quarter, second quarter, what you will need to see is deployment of a lot of the cash.

you probably need to see share buybacks accelerate, dividends accelerate, something to make up with a loss of earnings growth that will deplete the values. key.: there in lies the you still have cash. thank you so much, chief equity strategist for bloomberg. julia: is time for the bloomberg business flash, a look at some of the biggest business stories in the news right now. >> increasing sector gains ahead of the country's march for elections. the world's largest hedge funds up fromd -- tripled $1.1 billion in october. the election is set to perform, making it tougher to form a government with the authority to produce economic reform. lawrence is leading the company. the sudden departure of the wall

street veterans about the timeline for ipo's, which won't come until next year at the earliest. named thehnson was new chief operating officer. china's alibaba will buy future sense of its company and financial. that will clear the way for an ipo. live cash is exchanging hands. it will and royally claimants to alibaba the total more than $200 billion last year. strategy of making original content available on amazon and other streaming services is paying off. the web only version of the channel added more than 5 million subscribers in the united states. hbo also some revenue increased 7% last year. instead of charging higher rates, they are now giving cable

companies a bigger share of subscriber fees. that is your bloomberg business flash. scarlet: it's time for our stock of the hour. the biggest drag is paypal. it is about to have its worst day since july 2016 on its outlook, which we told you about yesterday. ebay's announcement to cut paypal as its primary processor. abigail doolittle joins us with details. abigail: the headline is clearly ebay, and the fact that they are not going to use paypal as the primary processor. if we dig in, it may be overdone. prior to the 2015 spin out of paypal from ebay, about 20% of paypal's revenue was ebay. now, it is less than 10%. the agreement between the companies goes away in 2020. it is going down anyway. the reason it has been declining, what we are looking at is revenue growth for ebay

in blue. paypal is outpacing the growth for ebay. that is national -- natural attrition. joe: is there a reason why ebay is doing this? abigail: they are going to aden. it is a european-based processor. apparently they are very up-and-coming. he wouldn't be surprised if he is covering them as the next ipo in a couple of years. you have to wonder if there is a bad feeling in terms of the spin out that they want to become independent. this stock has more than doubled over the last year. it was one of the big movers of 2017. they are doing a lot of things right. a lot of reasons is to think the guidance is conservative. if we got back into the chart, -- if we hopped back into the chart, these are the active users.

using themy is not as the primary, people will still be using paypal. it is not like the revenue will go from 9% to 0%. their core business is strong. when you look at the outlook, maybe they are in a conservative matter. resetting it so they can once again beat and raise. perhaps after the small disappointment for outlook, they will begin with to raise in the future. scarlet: they are waiting to get back into that cycle. coming up next, the countdown is up for apple's fiscal quarter earnings. how the iphone x can make or break it. this is bloomberg. ♪

♪ julia: what'd you miss? the countdown is on for a slew of big tex earnings. -- big tech earnings.

apple awaits their first look at the iphone x sales strength. joining us now from san francisco is alex webb. great to have you with us. even if we don't see a great increase in all iphone sales, the selling price we hope raises the selling price to something more juicy. >> some of the analysts forecast that bloomberg pulled together, the average place is well above $700. it is a record sale. slowing uniteen sales. it is very important to scrape every last dollar that they can. joe: is this quarter more important than others in the past? >> potentially. you can almost say that about every quarter. the most important number everybody will be looking at, not necessarily how they

performed over christmas, but the forecast for the quarter right now. that will indicate how well demand for the iphone x is holding up. julia: do you think it may be debunked the concerns that we have had? we always get this sense of the january concern, where production cut rumors suggest that perhaps this is a problem. actually it is just really gun g ho. do we draw a line on some of these concerns? >> that's what the bulls will be hoping, that apple will be able to do that. what it has done in the past is overbooked capacity for their supplier. million of a 120 particular component. if they see the demand slacken, they can tune it accordingly. it is making sure they have the best case scenario capacity. then they find units depending on capacity.

scarlet: reserving factories in advance. sanford c bernstein announced a policy of selling fewer this year. that is not the consensus view. it is somewhat consistent with this trajectory of a slowdown. we didn't get this super cycle the way they did in 2015. >> we have seen it in recent quarters. iphone numbers haven't had the same growth rates in the stellar years -- as the stellar years with the iphone 6 and going backwards. what we have seen is the slack has been taken off my things like services, the app store and itunes. also, the apple watch, these other product divisions. that is taking up some of the slack that is being left by the iphone slowing pace of growth. julia: talk to me about china. what we saw in september was the

best quarterly gain for a year. there is optimism that we continue to see strength from china. >> i'm not sure they recorded the first game. it was the pace of which growth was flowing. there is relativism when we look in china. we see a lot of the chinese competitors are taking a huge amount of market share. the interesting thing is qualcomm. it is known for the amounts is units spend on r&d. it is important for these chinese competitors to get the best chips into their devices. apple is working its own chipsets. that's why apple wants broadcom to purchase qualcomm. that means the technology that their competitors are able to get into their phones is not as strong as it may be. it gives apple and edge. it's interesting to see how that will develop. scarlet: alex webb, thank you so much for joining us. units in the first quarter, 80.2

million iphones. the market closes next, a look at the major indexes. we have a mixed breed with the nasdaq under pressure. the a team is on deck, all due to report after the bell. ♪

♪

julia: what'd you miss? stocks missed and treasury selling off. the 10 year yield up more than 3%. i'm julia chatterley. scarlet: i'm scarlet fu. joe: i'm joe weisenthal. if you're joining us live on twitter, we welcome you. scarlet: let's key started with our market minutes. the index is closing little change. the dow still up, at one point it was higher by 157 points. the s&p and nasdaq finished lower. apple amazon, and off a bit report the results. we are keeping a close eye on the route in treasuries. the 10 year yield is that a tie in almost four years. this has been the theme. joe: 3.03, serious selling off. scarlet: you wonder at what

point this will be back for equities, so far it hasn't been. you saw the dow move higher on the close. julia: we are waiting for amazon's earnings to come through. let's get a perspective for when the numbers break. .e are joined by leigh grogan scarlet: quarter earnings per share of $3.75 for amazon. we are not sure we are comparing like for likes, these companies have to deal with the adjustment from the tax law change. nextel may be the cleaner number to compare it to. billion, wet $60.5 are looking for $29.84 billion. etfs not comparable because you have the tax law change. when you look at the bottom line , you are not getting much of a read. what we do know is net sales, for the first quarter, will be anywhere from 47 point billion

to -- it could reach as high as $51 billion. analysts are looking for $47.8 billion. the range will be pretty much in line with estimates. 3%, it see the stock up will not be surprising to see a bounce around for a while as investors digest the numbers. the initial reaction is positive. julia: because the etf's was a big beat is because amazon had a tax benefit. $89 million for the quarter. it doesn't affect the way it does its numbers -- how it operates is more a case of what it does with the cash that it has access to. julia: we are hoping to get more details on that. the first-quarter operating income, it's missing the lowest analyst estimate. operating income is brought for these guys.

the estimate there is $1.48 billion. it goes to $2.24 billion, that's interesting for the first quarter. scarlet: alphabet reporting results, fourth-quarter eps of nine dollars and $.70. the consensus that the analyst was fort $10.04. in terms of the other parts of the business, we are looking at paid clicks. page clicks, which goes to the search business was, up 43%. the cost per click likely declined, as has been the trend over the last couple of quarters. we haven't and the exact number. operating income misses the lowest estimate that we surveyed. income of $7.76 billion for the quarter, they were looking for

$10.24 billion. the cost per click dropping 14%, even as paid clicks increased. aftermazon was up over 3% hours, alphabet down 3.5%. scarlet: let's go into the numbers with lee droge and -- leigh grogan. and paul sweeney. you want to start with amazon or off a bit? >> amazon came out -- or alphabet. >> amazon came out first. these are topline stories. these are stocks that investors want to see the topline growing. at amazon, there are so many levers to pull. whether it is for film and amazon, web services, -- whether it is fulfillment by amazon, web services, amazon fresh. the market has been deferential to jeff bezos in terms of how he reinvest the money. shareholders have taken a

long-term view. there are so many levers to pull on the core business. that is the focus. on the earnings call, people want to know what else they are doing. the grocery business, the health care business, there are other areas they are investing capital where people need clarity. joe: every one of these companies still operating incredibly. it still seems like there are still a few flies in the ointment of each one, if you are concerned about facebook's model and growth of users. the anxiety about apple and if the sales will come in. does it feel to you like this is a moment, or reconstructing a narrative of another era of change? >> when you look at the numbers of amazon, we are at 60.6, that's below the midpoint of the guidance range. all of the analysts and the estimates consensus point to it.

that is in the 40% year for your range. how can you not like the stock at 40% plus revenue growth? a lot of people poo pooed the evs numbers. when you look at the 90 day correlation, the stock price of amazon to the b and miss magnitude -- to the beach and miss magnitude. the backk away from because they blew the eps number out of the water. they still beat that number. julia: this is the first full quarter were they have incorporated whole foods. we have to look into the details, if they break it down in terms of what is providing cash. about $1.2 million, can we make the argument that it is paying off? >> typically the whole foods business is a lower margin

business. investors don't seem to care, the whole foods acquisition is basically an experiment on the part of jeff bezos and the amazon seem to see if they can figure out the grocery business. they failed once before. they want to see if they can figure out new ways for capital to go vertical. >> its money tree, it continues to print money. cost for clicks will go down. i don't think investors care at this point. it is hard to sell this stock. scarlet: just a quick mention on alphabet. we want to keep an eye on traffic acquisition cost, the revenue they pass on to partner websites. for the flask order, it came up -- for the last order, it was a big jump from one year ago, $4.84 billion. 24% of google advertising revenue. this number continues to rise.

google is anyout given quarter they can dial it up or down a little bit. they don't want to get in trouble with the government. there is nothing fundamental. , in thet facebook long-term there are more issues with that model than google. scarlet: alphabet says it will buy back stock up to $8.59 billion of class c shares. it has also named a chairman, john hennessy. joe: former president of stanford university. he was on the board, he has been involved in qualcomm. very much in the scene. julia: thank you so much, paul sweeney and leave drover -- lee grover. they are both here staying with analyze thetinue to

tech earnings. scarlet: also crossing bloomberg, amgen's results. adjusted analyze earnings per sf $2.89. $3.03.s were looking for there is likely some tax issue planes in. the stock is down 3.3%. this is bloomberg. ♪

♪ mark: i'm mark crumpton with first word news. and west virginia president trump -- in west virginia, president trump urged republicans to hold their ground on immigration. the president said a bill is in the works that will protect the dreamers. new legislation will not come at

american's expense. >> the senate is planning to bring an immigration bill to the floor in the coming weeks. i'm asking that the framework we submitted, great flexibility, working with both parties. something very positive will come out of it for our country. mark: protection for the dreamers is set to expire march 5. the president asked for a compromise. they run ford losing seats in the midterms if they don't. bob goodlatte supports the release of house intelligence committee memo on alleged fbi misconduct. at that retreat in west virginia, german goodlett said the public needs to know. >> i believe the document has been very carefully worked, based upon thousands of pages of source documents. i have had access to those

asuments and have read them, have other key people on the staff that have top secured clearance. "it is important we understand the fbi is a premier law enforcement organization in the world. everyday it keeps all of us safe from terrorists." he continues again, "there is a problem with some people at the highest levels." mike pompeo says there was nothing on about his meeting with top russian spy chiefs. chuck schumer, director pompeo said even though moscow remains an adversary, ignoring chances to cooperate on security issues with danger american lives. senator schumer has said the meeting was suspicious because it came days before the trump administration decided not to issue new sanctions against russia over it's interference in

the 2016 presidential election. the chief of the los angeles school the police department says preliminary information indicates the female suspect in a middle school shooting is 12 years old. two students were shot and wounded, one critically. it happened west of downtown los angeles. van into arove a crowd of worshipers and a london mosque has been convicted of murder. osborne found darren guilty of murder and attempted murder in the june 2017 attack in the city's park neighborhood. one person was killed, nine others were injured. he was influenced by far right ideology and motivated by hatred of muslims. global news 24 hours a day powered by over 2700 journalists and analysts in over 120 countries. i'm mark crumpton, this is bloomberg. julia: what'd you miss? we continue to discuss the big

earnings we got from the tech sector. still with us paul sweeney. over get back and pour the out of the earnings. weaker than analysts were expecting. what has happened? we are discussing this raining in cost, would be make of this quarter? >> i think they are going to get on call and say we are investing in our business. relative to street expectations, expenses are coming in higher on the operating side. google,often hear from as we do from these other high-tech -- high-growth tech companies that are spending money for returns down the road. for google, it is usually talent. they going to buy engineers, and hire talent. 85% of the revenue

generated at this company is advertising. the other 50% is evident house. talk to me about the cloud -- the other 50% -- >> when you talk about the cloud business, three big players, led by amazon, google, and mark soft. -- and microsoft. is the leading player. a lot of people in the marketplace will tell you they prefer the google product, the alphabet product. when you look at amazon, google, microsoft, what are they doing? spending money. they are investing because they know it is a long-term growth story. joe: for all of the tech companies that war for talent continues to be a huge story. for 10 years there have been stories about crazy -- about how crazy the battle for talent is. is there anything changing? >> it is really brutal, it is

getting worse. we are seeing across the board, especially silicon valley. it is localized, as well. in new york, not as bad. in silicon valley, as bad as it has been. it seems the market doesn't care. when you look at the google numbers, cost per click, 43% year-over-year versus sense and -- senses. they turned down the page click. the numbers are not that bad internally. i don't think people care about that cost. scarlet: we are searching for reason on why it is down. could it be the cost for clicks coming down? >> i would say it is down because the run-up. amazon ran into the report, google ran into the report, they are all big. we priced in these moves. joe: always on the lookout for the next big thing in tech, people think vr or ar.

voice seems to be doing well for amazon. jeff bezos saying alexa far exceeded predictions. for these other companies, apple, google, not as much players in this market. amazingn has this ecosystem. it is all going to feed. they are starting the advertising business. i was talking about something in my house, and i am getting retargeted for alexa. it.not even searching for they know what i am thinking, it will be amazing. scarlet: that is kind of scary. how much patience will investors have for the fact that amazon doesn't break of numbers for alexa, for these businesses that are exceeding, but we don't know what the project ? >> i don't think anybody gets -- what the predictions are. >> i think one of the areas people break and is the cloud

business. they recently broke out the cloud business. that was big for amazon. people got a consensus of the top line growth, and that it is profitable, they got rewarded for breaking out that information. is so of the reasons it big on eps is the revenue blew it out of the water. the margins are amazing. estimized consensus between right after the last report and before this one went from 4.85 to $4.59 billion that's what got -- $4.95 billion. this is really what is driving focus. julia: what about artificial intelligence? this is something we keep going back to. when we are looking at trying to monetize this, i can't help but feel that amazon is the key competitor, rather than facebook or apple. >> they have all of the data.

apple is having a hard time building software. stuff is not a good. how much do you use siri? i want to use siri, i don't know how to bring it up. >> amazon has the data, it is about the data. they have a machine, they know what they are doing. apple has fallen behind. >> what we're hearing is ai is one of the things, because investors are thinking about the --5-10 years. zuckerberg says the social environment will not be a text based one, it will be more of a virtual reality, augmented reality social environment. that's were facebook is putting their best. i don't think anybody knows what

the economic implications are, the paybacks, the returns. i think everybody is putting the money to work and expecting they will be returned down the road. blockchain, used liberally. scarlet: that's where the etf's that check those sectors are doing well. with us as weng continue to break down the big tech earnings. we want to learn you the highlight -- we want to bring you the highlights from visa. 08nings-per-share one dollar -- the dollar eight cents. -- one dollar and eight cents. cross quarters per volume one up. $.21 a share from 19.5 cents. also a buyback program. for the full year, adjusted earnings per share at the high a nominal-20's on dollar basis. the stock inching lower.

this is bloomberg. ♪

♪ julia: what'd you miss? continue.gs let's look at apple's earnings. is paul sweeney. maybe the iphone sales won't be anything to get excited about. the hope is the iphone x will pop the average turning price. >> this is where apple's trafficking is to stay true to their knitting, the higher end of the market. the asp should see a bump. john butler has been fairly cautious on the units, but focusing on the asp's. the question is what will the

guidance be, and to what extent can they give us any color? that ultimately will continue to be a significant growth driver. julia: the march quarter all-important. joe: thoughts on apple? >> gross margins because of the iphone x. revenue estimates ticked up significantly. what i am really looking at is gross margins estimates. midpoint of the guidance rage was -- range was 38.25, we're above the high end of the guidance range. people are expecting the iphone x to push more profit. scarlet: i wonder about apple and the forecast it gives. we have become accustomed to being conservative, lowball and what it will do, then beating that and getting rewarded. why does it continue playing that game? year ago, that stopped. and stopped lowballing it

came more in line with the reality. i think it also became harder for them to project. volatility,en higher mean variance in actual relative to consensus. also why stock has been more volatile. scarlet: it is a true reflection. >> they don't really know. >> it is a phone company. now 60% of revenue has been phones. revenuet like you have of phones at 30%. people have a good handle of the top line. julia: how much adjustment do think an estimate has been made f the rumorsrpo that -- for the rumors circulating, overestimates and the reductions from asia? >> that has come down. we started in mid-january at about 82.4 7 million iphones. 80.5 6shed before the billion -- 80.5 6 million.

joe: you mentioned apple not good at ai, voice, software in general. people have always said when is the other thing going to happen, it never really seems to matter. >> apple has the pe of microsoft. if they lose the one trick, the whole thing goes. people are scared of that. they keep putting up the numbers with every iphone cycle. until they really screw it up, they deserve at leastt halfhe p -- they deserve at least -- they deserve at least half the pe of microsoft. >> investors are looking for something that can be the next product. it may be has to be services. scarlet: paul sweeney, director of north american research for bloomberg intelligence. lead rope and -- lee drove been -- lee grogan.

this is bloomberg.

scarlet: breaking news, apple reported first-quarter results. $3.89, that-share is higher than analysts were looking for. first-quarter revenue 88.4 billion. we are looking for the iphone units sold -- a miss here, some be 7.3 million, analysts were looking at more than 80 million, so not as many iphones sold. 77.3 million -- in terms of forecast, let's look ahead to the second quarter. revenue forecast is trailing

estimates. for 65.9were looking billion, so we have a miss here in the number of iphone units sold in the second quarter, which is this current corridors revenue. thea: they are selling iphone ask is the top-selling iphone, but as far as shipping is concerned, they are down in revenues due to the weak quarter. the apple cfo also saying they plan to discuss what they are going to do with the offshore cash in the second quarter results. if you are hoping to get that now, you will have to wait for the next quarter results. joe: you can see the market saleson, down .1%, unit and the forecast for the march quarter the main story here. scarlet: the gross margin is keep an eye to begin

on. this doesn't only include iphone again,other devices -- fewer iphones sold. 38.5 on the top and -- emily chang just got off the phone with apple ceo tim cook and she joins us now with the highlights. of an i just got out in-person meeting with tim cook at apple park, the new headquarters. the iphone x about and whether or not he felt it was living up to expectations. he said that it is the most popular iphone they launched since november and has been the top-selling iphone every week since they launched.

he couldn't be prouder. he also talked about how the iphone is doing in china and whether it has been priced to high. he said it is a top-five selling iphone. in japan, he said six of the top seven selling phones aren't iphone and he said i feel great about that. another discussion is about the cash they are bringing back from overseas. has beentorically smaller acquisitions, so they bought beets for 3 billion, and he talked about buying 19 companies, and we stay constantly in the market and we look at companies tiny too big -- will it help us build a brighter -- better product. we are also looking ahead to the launch of the home pod which is days away.

this is a competitive market, and google and amazon is there in a big way and i asked if they missed out on this market, and he doesn't think they missed out on anything. the way they are approaching this as a digital assistant is that they are focused on a music at audio experience and something customers will love. apple shares bouncing around as investors think through these numbers. --lso see alphabet shares you also spoke with off a bit ceo, what did she tell you? bit of thealked a overall growth and she said she is pleased with what she is seeing across the board. there has been issues with you ids.ids and -- youtube k the overwhelming majority of advertisers never left, and we

believe in investment of policy changes and improving long-term. -- that was other up almost 50%. she said the majority is coming fiber.est and this is a quickly growing business for google but they don't break out the numbers but be giving us more details on the call of how quickly the cloud business is growing. scarlet: emily chang, thank you so much for joining us. this is bloomberg. ♪

scarlet: apple shares are following in after hours

trading, and now it is lower after apple revenue dipped analyst estimates. higher thancame estimated, but if you look at the fiscal fourth-quarter, 77 million when analysts were looking at 80 million. the average selling price was higher -- i am looking for my number. 767 -- and the revenue forecast for this quarter also missing the consensus. we have with us -- john, let me start with you. of the numbers you are looking at on the financials in terms of how much cash it has on the balance sheet, what sticks out at you? >> the selling price actually. it means the volume of iphone units that apple ships is less

important as that price keeps coming up. to me what is most important about the iphone x is that it is the first try into the thousand dollar plus smartphone market. if it resonates, that is good news for apple. they don't give us the mix of phones in the market, but the esb is a hint of how well that phone is doing. joe: not stellar numbers, but what do you make of the market? >> hard to get super excited without the growth in numbers. you have to look at where the additional growth is going to come from and if they can push that iphone number. they were below the consensus above on gross margins the high end range, and that speaks of the asp there, was raising the price of the iphone detrimental to the number of people who bought it?

did they get enough iphones out the door or was there a supply issue? lotnext quarter will tell a more on that and the market is giving them the benefit of the doubt. julia: what is the tipping point? out, we have a drop in the number of iphones being sold here, which is a concern. at what point do you cannibalize the business going forward? >> back to the argument, the market trees this as a hardware company and not software, and thus it is looking specifically at those sales. if this company was a software company or a retail company like amazon or anything else, the market with wanted to sell more phones at a lower price so it would the in more hands. but it doesn't care about that because apple has a built software in a long time, so they smart and say are you going to

sell more phones in the next quarter? julia: wow. john. >> it speaks to apples power of the margin, it is the one thing tim cook is very focused on. to me, all they need is a bridge to more services in the mix. that is where the profit growth lies. over time it will exploit the ecosystem by offering more and more services and that is very constructive to the margin and a long-term. i haven't seen the number for the current quarter, but i'd because he is to see where services came. -- inpeaking of services the release, apple has its total installed base of devices reaches 1.3 billion in january. there iscation is that

a lot of potential services out there. what specifically are the services when you say you think it is going to do more in terms of real moneymakers? which are those? applecare or more into the home overtime. let's take icloud as an example. i keep buying more storage and i think everyone is in that boat as they take more photos. apple is building their own data centers over time. profitables a business, certainly with the cloud business as you are seeing with amazon and microsoft. 18%, justenue jumping to underscore that comment. i'm going to point out something our tech reporter said -- apple has to work harder to sell related services and other

devices. and also means less time for the company great the next big hit. augmented reality, virtual reality, or automation. you are kind of narrowing your window from big numbers to sell things that you are talking about, developing a greater proportion of revenues. the bridge they are crossing is a bridge from being mostly a hardware vendor to a much more balanced revenue mix between hardware, software, and service. >> what is the last software product they develop that everyone loved? their ownhe app on screen on any of the iphones they developed? they can't even do their own podcast app that works. tim cook knows what they are good at, they make hardware

everyone wants and he focuses on that, thus gross margins do well. i don't think he knows how to push to the bottom line or top line, real revenue. 10% is other services, that isn't going to make a dent in the higher pe until it gets north of 30 or 35%. >> it might make a difference for 30% of revenue, and that app store alone, it is going incredibly fast. if there is a surprise under the head at apple, it is going to be the power the services business generates profits over time. julia: and you say the good news is in the price for apple? pe,t trades at a very low pe that ist a generating a lot of cash but has no growth. and if itlue stock, slips up on one iphone cycle, it is screwed.

scarlet: how does the investigation into apple's lack of disclosure for throttling phones for software updates -- we talk about it when the news crosses and we break the news with it, does it have implications down the road for apple's revenue and connection with the customer base? >> i don't think so. havenalysts covering that agreed with me that it is a political showboating in an election year, more than it is a great infraction on apple's part. scarlet: democrats and republicans phones is being slowed down. [laughter] apple's conundrum was today slowed the phones down or let them crash? as a user i would rather have a phone slowing down a bit and crashing. the question is transparency. should they have come clean sooner, but that is tough to say. >> i do know anything about

anything, but i don't want to slow my phone down, and i have had iphones for years. when it gets old, it is the software update, and they need to upgrade cycle. if it cracks like a duck and it walks like a duck, it is a duck. scarlet: would you buy another iphone? >> absolutely. [laughter] julia: from new york. this is bloomberg. ♪

julia: some breaking news now from cbs, a special committee to evaluate a potential viacom deal. this has been brewing for the last couple of days, in particular the plan to prepare to announce to discuss the is formings that cbs a special committee to evaluate the potential of a viacom deal. this would be a process of reuniting the two media companies that were split by sumner redstone more than a decade ago. combining the cbs network with viacom's nickelodeon and mtv networks and the paramount film studio. scarlet: it is time now for the newsflash of some of the biggest news. negotiations to acquire buzzfeed news, according to a person familiar with the matter says talks are the latest of the struggling publishing industry.

its workforce after missing revenue targets last year. rough start for detroit three. general motors deliveries increased but missed estimates. tesla will test renewable energy products and whether they have mainstream appeal. elon musk told bloomberg a half major expansion at home depot spacesby tesla selling of solar powers and power while batteries. guess could be the latest to be hit i the #metoo movement. kate upton use the hashtag and said that their ceo shouldn't use power to sexually harass women. he stepped down as ceo, but is

still a major influence at the company. that is your business flash update. "what'd you miss?" retreat toholding a discuss strategy. themdent trump addressed earlier, and kevin cirilli spoke with mark meadows was chairman of the house freedom caucus about infrastructure, immigration, and the fbi memos. >> that is the big question. as you heard the president in the state of the union, he talked about public-private partnership. or so in government funding, which is tough for fiscal conservative. outside of that, public-private partnerships for airports, seaports, not as much for toll road side of things. yet, those mixes have yet to be

determined. i talked with secretary chao and the administration and i'm hopeful we will see a real plan in the coming days, not months. thean you get on board for $200 billion spending? >> that is an issue for conservatives when you look at that. if we increase nondefense discretionary dollars as part of this deal, we plus a defense on the nondefense side of things, if we can put a certain amount -- a substantial amount into nondefense over on the roads and infrastructure side of things -- i think you will find more support there then growing the size of government. we are worried about posting it up and letting the exponential growth continue to happen. >> how do you ensure

infrastructure benefits all parts of the country and not just cities? >> that is a big part of it, rural broadband is important in areas i support. one of the problems we have seen in packages in the past is on the mass transit side of things. over 80% of the dollars go to six cities. making sure that allocation goes across all cities -- if you are in urban areas, but also bridges, roads, infrastructure, broadband. those allocations are a critical component than the dollar amount. not to diminish the dollar amount, but if you can align those priorities and make sure all benefit -- all americans get the benefit, the dollar amount becomes less of a factor. -- it permitting process

takes seven years in order to get an infrastructure. the president campaign to reduce that timeline. what role does permit think play in this -- permitting. >> we spent more time permitting than working on roads. thatve moved to streamline -- it is down to a three-year time frame. we need to get it down to 12 months. when you look at that process, it is why we are having a hard time with getting things built. it is also driving the cost up, and the administration is serious. i know members in the house and senate are serious about that t of the bill needs to address that were would put more dollars into things people drive and are transported. >>'s are going to be a

government shutdown next week? >> i don't believe there will be. i think everyone has a small taste of a shutdown a few days ago and it is not very tasty for any member. it doesn't taste good. more poorly doesn't taste that to the american people and can figure out why we can't do our jobs. daca.ckly on moving towards a compromise? >> we are getting closer but we have ways to go. i believe we will have a deal before march 5. i think will have a deal by february, and in washington dc that is long before. i think we get a deal there. julia: chairman of the house freedom caucus with kevin cirilli.

let's take a look again of after the bell. let's start with amazon, amazon delivery what analysts hope for. a strong bid for the earnings per share. cloud business increasing competition and added more customers in prime. take a look at the stock performance after hours, up 6.1%. joe: apple up modestly although q1 outlook a little less. scarlet: and profit at alphabet falls short. this is bloomberg. ♪

>> coming up, the latest on deutsche bank fourth-quarter results. >> been the jobs report. >> don't miss the next report, that does it for what'd you miss? >> have a great evening.

>> you are watching bloomberg technology. let's start with a check of your first word news. president trump will approve the release of a memo that alleges surveillance abuses by the fbi. the white house agreed to some

reductions with the house will be responsible for releasing the memo because it is a legislative document. pelosi dismissed it as a cover up republicans claiming the motive is to protect president trump. it was prepared by republican staff. democrats call it cherry picked. former massachusetts governor and gop presidential nominee mitt romney is fueling speculation he may step back into state politics. he said he will make an announcement on february 15 about the senate seat skin to be vacated by orrin hatch. two students were shot and one wounded critically in a los angeles middle school classroom. police took a female student into custody.