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.

global news 24 hours a day powered by more than 2700 journalists and analysts in 120 countries. this is bloomberg and bloomberg technology is next. emily: welcome to bloomberg technology. apple's brand-new headquarters with what else but apple earnings. i just got out of a meeting with tim cook i will bring you highlights. let's dig into the numbers. slightly below estimates. the average selling price was

$796. the company hitting an all time revenue record. $88.3 billion. i want to bring in cory johnson in new york. i want to start with a quote from tim cook, there has been concerned about how well the iphone teller -- iphone x is selling. he said it was the most popular smart phone launch since november. every week it has been the top-selling iphone in the world. what is your takeaway? >> it sounds solid to me. incredibly sophisticated. it has a higher price point. the replacement cycles are slowing. it is a strong number. people like to point to the high price point. deterredhas desert -- consumers from upgrading.

emily: we talk about the performance in china. there has been concern the price was too high. when i asked about that he told me the top five selling smartphones him everyone was an iphone. it is the same in the u.s. and japan. iphonessix out of seven -- phones are iphones. what do you make of these numbers given all of the fuss over whether this was too expensive? cory: it wasn't too expensive. apple made a lot of money selling an expensive phone. they are defensive about what we are hearing about a slowdown. were the fact unit sales down, even though the phone is a technological marvel. julie's point is important.

looking at the competitive world, apple is trying to move its financial model towards a service model and away from being purely hardware. the introduction of new hardware isn't about the hardware itself, it is the trojan horse to services customers will pay for. we have to evaluate not just how well the phone sales, but their ability to have other revenues. that is going to take longer. we did not know when the iphone launched uber and instagram would be invented in become the killer applications for this devise. we might not know in the first 15 weeks of the existence of the iphone x what the killer application is, but it is the anted goal the it will be apple app.

>> i did ask about battery gate. department of justice, the fcc theasking questions about iphone battery replacement issue. he could not comment that said there are agencies around the world asking questions and they are cooperating with that. he singled out the apple watch. this category would be the size of a fortune 300 company on its own. how optimistic are you about non-iphone products? coryis builds on the point was making. out, the services. that makes these devices more valuable. the more a consumer owns within

valuable andmore more likely apple is going to be ,ble to sell music, payments things like that. both of those are important. mily: apple is bringing billions and billions of dollars tax from overseas thanks to reform. i asked if that was going to be changing anything about m&a strategy. he pointed out we have acquired 19 companies in 2017. that is a company every 2-3 weeks. we look at companies tiny to big and would improve the life of a customer, can it help us build better products. that is how we decide.

cory: fortune 300. that seems ridiculous. on the day when they take the timing sign of of the building and he points to lists that do not exist anymore him of the cherry picking to dress up the results as being better is stretching. aftersold fewer phones the biggest release they've ever had. meanwhile, some of that has to be about price. they brought in a lot of money for this phone. revenues are fantastic. expectll the things you from this company but the success of the phone is tepid. fundamentally it is going to be

about the phone sale going forward. the reduction of the guidance in terms of revenue is so much below what wall street has expected in terms of growth based on where apple has directed them, it shows apple is up against it a little bit with this expensive phone. emily: how much does it matter that upgrade cycles are getting longer if they are bringing in record amounts of money and that money is coming in from different parts of the businesses? it is coming from services, it is coming from apple watch. the homepod is just about to be sold in a few days. -- theit is not just smartphone is the biggest chunk of their revenue but they are creating more. services continue to grow. one of the other things,

traditionally hardware has been on the size of three, how shiny it is, things like that. it is getting harder to differentiate. it is becoming more important my the experience on the phone. we may think they are awesome but there is a long way to go. they put a lot of cognitive load on consumers. the things that will make experiences better over time are going to be subtle and hard to communicate to consumers because of artificial intelligence and machine learning and it is going to be subtle. using the phone has gotten easier. it is a better experience, but they can't pinpoint why. sell theseharder to devices even as they are getting better. then things of maryland -- around the ecosystem.

it is getting harder. emily: all right. got it. julia, always great to have you here. thank you for breaking it down. cory from your sticking with me. we will be talking about amazon. jeff bezos was to double down on alexa. this is bloomberg. ♪

emily: welcome back. we are talking now about amazon earnings. amazon having its strongest holiday quarter since 2009 fueled by e-commerce and cloud. jeff bezos wants to double down on alexa. back with me, cory johnson. breakdown amazon earnings for us. cory: we spent 10 minutes talking about how apple is trying to make the iphone x work better and how they are law -- lowering guidance. amazon, whereking the biggest to is what happened with this giant platform and the skills available. we are at this important inflection point where the most -- and mostvise

importantly vice in the world, this is the moment. the leader in technology is no longer apple. inflection point is so important because computing is moving to the phone to voice. results of both companies today. the applelike platform was open to multiple developers and hardware developers. amazon alexa is part of that ecosystem. they are already in the place apple wants to be. >> i did have a fairly long conversation with tim cook about the homepod. do you think you missed the

category, that you let amazon get away with that? he said i do not think we missed anything. he talked about this idea, a personal assistant is your phone. they have syria. -- conception of home pod music and audio devices. cory: but they missed it. history still has yet to be written. we do not know how it is going to do. what do you think? can they catch up? has over 4000 home connected devices now. has apple missed it? they sure are looking at taillights. they are going to have to do one thing, attract massive amounts of developers to their platform

to pay attention to home pod and then do the work to get people on the platform. i want to add one thing cory said. aws grew. as it gets stronger, it brings developers in to enable things like alexa. now they are in this circle that gets stronger and stronger. that is a big move. is it unassailable? no. but apple has worked to do to grow. listening to the apple earnings call. he is talking about service revenue. they are in double service revenue. they put up 4 billion in the quarter. to your point, amazon's business

here, web services does fantastic. they are also learning about what everyone is able to do. this notion of a hardware independent service business in the world of technology separate from selling people a lot of stuff, these guys are clearly the leader and growing at a fantastic pace. emily: tim cook told me we already have a personal assistant in 1.3 billion people's hands. moving on, let's talk about the cloud. we will get into that was apple that results. dig into the aws numbers for me and how quickly this business is growing. >> it is growing at a large scale. in terms of just margins, amazon loses money basically in the selling of stuff.

the margins of 26 and a half percent, terrific and better than last year. for aws it is important. everyone is doing more. compare that to the rest of their business, it drove the rest of the results. amazon was profitable selling packages in the u.s., very profitable at aws and lost money in europe. they had a fantastic cash flow. they got 7% rise in year-over-year. free cash flow was down because they spent money building stuff so we will see more quarters like this. amazon is not working in the last quarter. amazon is working on a quarter three years from now.

these results show what they were looking at three years ago. apple is still trying to get out a speaker product that they missed the date of early in the year. >> my bet would be those margins expand going forward. as they start adding more and more tools developers can use and charge for. get the developers in, then get people when they are managing to use more of amazon's developer tools. that could be scalable, even more than it has been. speaking of investing, amazon saying their new headquarters will cost $5 billion. the company will bring in $200 billion in sales this year. cory johnson, you are sticking with me. after that shares are down.

outback earnings, next. this is bloomberg.

>> google cloud has reached meaningful scale. is axcited to share it billion dollar per quarter business. google cloud platform based on , thecly reported data fastest-growing major public cloud provider in the world. emily: "ceo talking about the cloud business. we are live in cupertino, california breaking down off of that headlines. eric schmidt stepped down. he remains on the board but shares are down after profits missed estimates.

cory johnson is still with us. thisre you looking at here? >> bottom-line, the other parts of the business are costing too much. expenses grew faster than revenue. what you see is while some new efforts are making great progress, particularly the clip about their cloud, their cloud business is growing. three inare the number a three horse race. they need to do a lot of work to get that business to contribute on a scale that is going to allow them to not only continue to grow but payback the investment they have made in that business, which is still what you are seeing in the numbers. youtube has had a tough year. they have to consolidate the

businesses, they have in making that. line, the business is not scaled the way they need. emily: i just got off of a call from the after that ceo. we talked about the shares down. she says we are proud of the overnight revenue growth. we are staying focused on long-term investing for businesses and intra-quarter variability will be what it is. how concerned should we be? cory: i don't think terribly. some things in the numbers, they looked reasonably positive. two things that are the most the clickmetrics, growth and the value of the click. what we saw from the click growth, at the google site and

other sites, it grew faster than last year. is better than the 36% in the year-over-year change. i think that is pretty good. , maybe i amging looking for good news here, if you look at the valuation of the less and less. unlike facebook, the price per click, the how much marketers are willing to pay, they don't tell us the number but they show it is not getting worse. 14%.s down that is less than recent decreases we have seen. i'm sure they are hoping that decline. . emily: all right. thank you both for joining us.

we will continue to watch the apple that shares fall and bring the headlines to you. we will have more on apple. tim cook is speaking. more about apple coming up.

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near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. >> you are watching bloomberg technology. here is a check of first word news. at the gop annual retreat, president trump said an immigration bill is in the works

but will not come and americans expense. >> the senate will bring an immigration bill to the floor in coming weeks. we --sking the framework be submitted with great flexibility, that something positive will come out of it for our country. >> rex tillerson is warning countries in the americas against chinese investment saying it there is still militaries with colonialism. out toe before heading latin america and complain china is now the largest trading partner with argentina and peru. the uss siri maybe developing more sophisticated chemical weapons despite a deal to destroy its program. u.s. officials believe bashar al-assad's government is seeking to expand his weapons. of mehdi drove into a crowd

worshipers has been convicted of murder. one person was killed. nine others wounded. global news powered by more than 2700 journalists and analysts in 120 countries. afters bloomberg just 5:30 in washington. friday morning already in hong kong. we are joined with a look at the markets. happy friday in good morning. >> very good morning from hong kong. we are looking across markets. first poised for the weekly drop in eight weeks. it takes you to the start of december. australia gets underway 30 minutes from now. we are looking at declines likely. japan, aboutase in

a quarter of 1%. south korea as well. lots of earnings coming through. we are watching these apple related manufacturers. we're a following a lot of earnings. the last thing i want to mention, in the asia-pacific, something to watch. bond markets did not like the indian budget. a lot to consider. forum bloomberg technology. in the league: welcome back. i'm emily chain live in cupertino, california.

apple's brand-new campus. they have been moving in over the last several months. this will house 12,000 apple employees. the first earnings report, i did get to sit down with tim cook for a lengthy conversation. and outonitoring amazon of that earnings. out of the shares are down. all the focus is on the iphone. the average selling price, $796. , $88.3breaking revenue billion in revenue. i am joined in san francisco, i know you have been digging in the numbers. what are the highlights? >> it is all about the iphone ask. forecast buteak when you look at the average whenng price, that implies

shoppers are buying an iphone, they are buying the top one. emily: that is something tim cook did emphasize. the iphone x has been the most since itvery week launched. i asked about the questions, slightly below estimates. people have been concerned. he pointed out the iphone is still the top five selling smartphone in china. he said he feels great about it. the reality is the upgrade cycle is getting longer. what does that mean for apple long-term? look at total iphone sales, they were not great. the implication is overall demand for smartphones, it is not that great. if you think about it, selling a more expensive phone, unit sales

do not grow as much. total revenue will grow. that is a great strategy. so far it is working. has augmented reality. that is where they want to go. the more people they have, the better for that strategy. emily: and the homepod is coming out. a lot talk about whether they have missed the market, a claim tim cook would dispute. what is the outlook for the homepod? number isal iphone important when you are talking how many accessories apple is going to sell. iphones, the more iphones people have the more likely they will buy a home 10 -- home pod. there is an uphill battle. apple, most customers are very loyal.

that may give the homepod a chance next holiday. emily: we talked a little bit about m&a. apple is bringing back billions of dollars back in cash overseas due to tax reform. they talked about how they would reinvest. i asked what does it mean? what they consider buying a big company? he said we are always in the market. they bought 19 companies last year, one company every 2-3 weeks. they are continuing to look at companies, how does this add to our portfolio, does this improve the life of our customers? largehas not made acquisitions. do you read anything into the remarks? that may be the strategy is changing?

>> it is an important comment. bringing this cash is going to make it easier to put it to work. the strategy going forward, they need another big hit. transportation, self driving cars, and entertainment. streaming video. they have a lot of work to do. a big acquisition would help them. investingve been heavily bringing on new talents. alastair, thank you for breaking it down for us. we will be talking about paypal. we talked about the big news of the day. ebay transferring its primary business to a competitor. back with paypal after this quick break.

emily: welcome back. park, in apple california, moving on to paypal. yesterday the big news, ebay is transferring its primary payments business to a competitor, away from paypal. i spoke to john rainey and asked what this means. >> the main takeaway is this is a natural evolution of our partnership. it is the next chapter. this was anticipated, built into our plans and does nothing to change our long-term earnings. emily: there is concern about how it will impact payment volume and how you will replace

that. how much comes from ebay? 13%.day, ebay is it is the slowest growing part of our business. if you look at 10 quarters since we separated, the average growth is 4%. the rest has been growing at 23%. if you fast-forward, you can see they would be a smaller piece of our business. there's a couple of key points. we will still be a part of ebay's business. we have a term sheet. the largest part of the business we do with them today will continue. that is the most profitable part . two other things, this allows ebay to partner with someone else. large market, most already do that. this is a natural extension. it allows us to partner with ebay's competitors with

unfettered ability. emily: let's talk profitability. there is concern. how will this impact paypal? >> we don't believe that this is well within our plans. we continue to grow these faster parts of our business. we believe it doesn't do anything to change profitability after the operating agreement. emily: when will we be able to buy things on ebay with paypal? to the extent we have unfettered ability to partner with many marketplaces after that, hopefully we can. tax reporthas impacted you? >> we generate a lot of cash flow offshore. we will see our attacks -- effective tax rate stay in the same range.

17-20%. because ofwill go up the guilty tax that will be imposed internationally. emily: you have more flexibility. what might you be interested in? >> all of the above. there are two categories. expanding geographic footprint. we are a global company. we would love to be bigger in some markets. there are a lot of complementary pay, that arebill good for our customers. >> that is the paypal cfo earlier today. now to cory johnson in new york with more on alibaba earnings. >> a big day. they failed to impress the company's gross margin,

slipping. it rose 18% in the fourth quarter. it was interesting deal. they dropped the profit-sharing deal. they are quite a take 33% of the business and stop taking cash. alibaba is a big part of that index, how big is it to your index? holding.the largest about 9%. it and tencent are neck and that. they are almost always at the top. >> you were in an interesting position. maybe you do not care if it goes up and down. transactions,g can you explain what is

happening, giving up cash payments from financials, handing over a third of the equity? >> i have not had the chance to dig into the details of it. the original relationship has been complicated. the chinese of regulatory environment about ownership of certain financial related entities. either way it is still a big deal to them. online payments is part of the entire story. currently, what is more important? advertising or e-commerce? >> e-commerce is the business, the most profitable piece and contribute to $7 billion of this quarter. that is the bread and butter and it will continue to be so, and help fund other initiative you

are seeing. isn't it just advertising on the site? it is not actually shipping of goods. >> it is a meaningful part. one of the stories we saw, advertising spending now exceeds rmb spending. so yes, they generate revenue from multiple sources but it is people going on their phones. you have a billion chinese people walking around with a shopping mall in their pocket. margin made and the middleman between goods manufacturers and the buyers. the cory: the majority is advertising. is interesting, certainly. all of this m&a is, when you read the financials, you read

about these deals they've done. follow mergers and acquisitions. it really is moving. >> it is a moving story. the story is a significant size. these guys have been prolific investors into other internet companies. they have well over 200 investments. you have both companies investing in the uber of china. that is part of the nature of the business. in some ways they are both internet companies and venture capital firms. investing.een more there's a lot of acquisitions of those companies.

that is definitely part of the story and the businesses. cory: thank you. still ahead, we will dive back into big stories, more to come on all of those. targetinge company is down to zero with repatriations tax law.ble to the this is bloomberg. ♪

>> we estimate making a

corporate income tax payment of $38 billion on our cumulative past quarter earnings. this amount is similar to what we have been accruing on those earnings in our financial result . the apple cfo on the apple earnings call breaking down this quarter's results. tim cook talking about this battery replacement issue. they decided to cut the cost so users could cheaply replace them in the midst of battery gate. he said we did not consider what it would boot -- due to upgrade rates. in our meeting, he told me there are agencies around the world asking questions. they are cooperating. of course, the concern is, what does this mean for upgrades over

the longer term? cory: there is the issue of customer trucks. -- trust. they made my old phone slow. they are trying to maybe buy a new one. they made my old devices seem old. i think those things matter. like timl ceos talks cook. you want to see that in the behavior. abouters have questions what is going on. that can hurt people. do they want to be a purely apple home? this apple devise, they want to have a bigger role. amazon, having great success. i'm sure no one is noticing that more than apple. told me everything

they have done is simply to improve the customer experience. there was some discussion about tax reform. what would you highlight? cory: i heard those comments and thought i thought my tax bill was bad. the thing that i am struck by is the broader conversation when people in washington are saying they are putting their vote in america. they are going to be taxed on this money whether they bring it back or not. , they are being forced to do this. that is why they are. they have been asking for a better way to bringing this money back. it is not like they have a choice in the matter. >> out of that, amazon calls underway as we speak. they are just about wrapping up. things you would

pull out? , talk aboutkeaway companies changing technology, this does seem like a seminal moment. voice.hould have owned apple had this product with siri, like nothing we have seen before. with alexa, with open floor ,esign on software and hardware opening up a platform to drive through these speaker devices of all swordsman -- of all sorts. your house is surely littered with this stuff. they have had terrific success and a great consumer experience. the fact amazon says they are

going to double down here in the same hour that apple is saying they are not going to sell as , it phones as they expected is striking on the face of it. there is a different direction with these two massively successful technology businesses. emily: we use alexa for knock knock jokes and music. i love jeopardy. that is a big one. i have not -- emily: i have not tried that. cory: it is a fun one. emily: i do have one more thing i want to talk about. the boys club of silicon valley. i am so excited about this. something i have been working on about how and why women have been left out of the greatest

wealth creation in the history of the world. ,e will have special coverage diving into these issues. i can't wait to share this with the world. thank you for tuning in. live from cupertino some apple park, apple's new headquarters. that is all today. we will be back tomorrow. ♪ we use our phones and computers the same way these days.

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yvonne: it is 7:00 a.m. in hong kong. look at the "daybreak: asia". this friday,es amazon go beating the top and bottom line. alexa also topped expectations. shares slumped, there is concerned that google's parents will have to pay more. betty: i am betty liu in new iphone touches a break as sales in the holiday quarter were below estimat