japanese prime minister shinzo abe at the president's private club in florida. killed ander was seven others injured when a southwest airlines jet apparently blew an engine at 30,000 feet. faa officials say the plane was hit by shrapnel that smashed a window and damaged the fuselage. the flight was from new york to dallas with 149 people aboard. it made an emergency landing in philadelphia around noon. treasury secretary steven mnuchin says the irs will extend the deadline for filing 2017 tax returns because of a website outage. glitch makes it impossible to accept information from service providers, and taxpayers will not be penalized. starbucks says it will shut down more than 8000 stores across the u.s. on the afternoon of may 29. the coffee chain plans to conduct racial bias education classes geared toward inventing

discrimination inside its stores. the move comes after two black men were arrested while sitting inside a starbucks cafe in philadelphia. global news 24 hours a day on air and at tictoc on twitter, powered by more than 2700 journalists. ♪ emily: i'm emily chang live from los angeles. this is "bloomberg technology.". coming up, ibm takes a tumble. stock price plunging despite strong sales. we look at first quarter results are plus, tesla's second timeout. the electric car manufacturing stopped production on the model three and sent workers home, but new reports are just out that the company is changing gears and asking employees for 24/7 shifts. detailed ahead. apple pushes detailed -- deeper

into news, but can it be as successful as apple music? first to the lead. ibm shares tumbling in after-hours trading, the company's first quarter growth margins missing analyst estimates, despite ibm notching another win in its campaign to reverse years of revenue declines as it reported its second straight period of sales growth. to $19.1rter rose billion, beating analyst estimates. the new strategic imperatives units saw a 15% rise in revenue from the year before, including the cloud analytics and mobile focused businesses. for more, let's bring in bloomberg intelligence. walk us through the main weaknesses here. reporter: the biggest issue is gross margins. this has been an issue for some time. we have written about it. even this year, we should see a slight decline in gross margins, although the pace of decline will not be as bad as last year.

that remains the number one concern at this point, which we believe is driving down the stock. emily: does that outweigh the bright spots? security, cloud, analytics. reporter: if you were to take currency off, the revenue is flat. that is similar to what has been happening for the last year and a half. i would not get too excited because of the push because of currency, but when it comes to gross margin, that is the profitability of products you are selling. they have more investments in cloud, cloud-based products taking over legacy products, and lower margins to begin with. then they have pricing pressure on legacy contracts. if they contact comes from renewal, you are seeing pricing pressure on it. those factors are having an impact on gross margins. emily: let's look at ibm's role in the bigger picture questions about tech regulations that are happening. will likely benefit from

increased focus on customer data privacy in europe and beyond as a result of gdp are. explain that to me. reporter: that is ibm's tagline. they are saying, you have a large portion of your data at your own data centers, and we can make sure we will give you a hybrid cloud environment which is your data center as well as our private cloud, and you can move the data back and forth, but it will still be in your domain. that is their marketing push around it. have seen growth in the security business where people are using consulting and products that are more gdpr compliant. emily: if that is a marketing spin, do you buy it? will it help the business? reporter: we believe the public cloud vendors are also gdpr compliant. you have cloud application vendors, also gdpr compliant.

the question is, what does the client want? does the client want to move a large portion of the infrastructure into a public cloud environment, or are they happy with the hybrid environment? in the case of a public cloud environment, they do have a public cloud offering, but that goes more to amazon, microsoft, and google. but if they look at a hybrid cloud environment, even then a large portion goes to microsoft, and some of it to ibm. emily: ibm is also making a push into emerging technologies, but with ibm, it's almost -- always how much will it impact the bottom line? let's talk about blockchain. ibm is trying to be on the forefront of blockchain, but at this point, what do you make of how much these efforts will actually improve the business? reporter: whether it is blockchain or watson, collectively, these do not account for a large portion of the current revenue. quarterlyk at the

numbers, these are small portion. having said that, if you are really investing in blockchain, ibm has a good strategy because they have the hardware that goes with it. they are trying to use the services arm whether it is consulting or using engineers to create a custom solution. whether it is blockchain, iot, artificial intelligence, they have a presence, but a very small portion of the total revenue base. a large portion of the revenue is still declining and it is still there legacy products. fory: thank you so much breaking it all down. we will continue to follow ibm shares. as we have been reporting all day, tesla has temporarily suspended production of the model three sedan. this will be the second time in two months the electric carmaker has been forced to put the brakes on the model three. we have new reports tesla is switching to 24/7 shifts for employees. is apparently

ramping up production with 6000 per week by june. musk spent time on twitter last week acknowledging production problems and arguing with the economist magazine saying tesla will be profitable and cash flow positive this year. what is going on with tesla and production? to answer that question, let's bring back max chafkin, who has been injured -- digging into this. i know you have been reading into this new report. a lot of juicy stuff in here from production halts to 6000 model three per week. what do you make of it? reporter: although elon musk appears to be working 24/7, famously, as he has told pretty much, to everyone's sleeping at the factory, these 24/7 shifts are different, like three different crews of people, it's not as if tesla employees are working around the clock, although many executives probably are.

the other thing is, in this memo published a few minutes ago, elon musk says the plan is to this shutdown and then ramp up to we saw a similar shutdown followed by a ramp up a few weeks ago, which allowed them to hit this 2000 unit milestone that we saw in the last quarter. the plan now is they want to be at 6000 by the end of the second quarter. he says in this memo, which is sort of a fascinating look at the psychology of elon musk, that the idea here is to build a cushion so that even if they fall short of the 6000, which text the best tesla has been want to do, they will get to 5000 which is what they were promising to investors all along. aere's also information about plan to add a lot more employees. they will be adding 400 to the factories in the coming weeks, and a big push to profit. emily: tesla shares are up on

the news. here's a quote from elon musk in the memo. "we are burning the midnight oil to burn the midnight oil." obviously, the production halt is not good news. how bad is it in the grander scheme of things? reporter: it's really hard to know. i caution people into reading into the tea leaves too much. the production halt, as tesla has said, is just something that happens, not just that tesla, but a lot of companies. you have to reset the line or make sure the tooling is right. there are reasons to stop production that are not bad. that said, there have been a lot things, which would cause someone who is a tesla skeptic to see this as yet another sign that this company is in over its head. if the numbers keep moving in the right direction, investors are going to be happy. elon musk will look like a genius. of hiswhat do you make

comments last week on cbs, that he overdid it on automation? reporter: that's a huge shift. one of the key things tesla had been talking about as a differentiator is that this was going to be the most automated car factory in the world. that was going to allow them to hit these crazy ambitious production numbers. the problem, as we have been learning, is that it is harder to plug people in. what seems like is happening in the factory, when you start pulling little tidbits that are filtering out of there, tesla is moving much more toward a traditional sort of human focused manufacturing process, which is why they are adding employees and shifts, and why they have to focus on profit. they spent all of this money on these machines, which was supposed to save money in the long run, but now you have to add employees on top of that, which will create cost pressure on a company that already doesn't have -- is already

losing money. emily: shares are up, but at what point might customers start asking for their deposits back? that's not happening already? reporter: this is a sort of superpower that tesla has, that people are super fans of the company. in terms of those who have already put down a deposit, about half a million people, this is not their primary car. only talking about $1000. i think we are a long ways off from that. that said, the longer this drags out and the more we get delays, you will start to see other car companies coming out with compelling products, the greater the danger is for tesla. it's not so much about these customers asking for money back as investors buying into a larger vision of tesla as potentially the biggest auto manufacturer in the u.s. if all they have are the customers who put in deposits, that is not good enough.

they need to keep adding giant cohorts of customers each year to hit division elon musk is talking about. emily: i do want to acknowledge the tweeting, elon musk continuing his adversarial relationship with the media.this tweet to "the economist " the economist used to be boring, but with a wicked dry wit, but now it's just boring." another tweet talking about how ideas just pop into his head. a follower asked what he was thinking, and he said "too wasted to remember." at what point do investors start getting distracted by the state of mind here? reporter: he has always been a pugnacious sort, and i think that is part of the appeal. that's part of what people like about him. in terms of the tweeting and things like that,, i thin the greater -- i think the greater area of concern would be all projects.in

addition to spacex, there is the ai thing, the tunnel thing, he's apparently hiring a humorist from "the onion." i think it's more about distraction in terms of possible danger to tesla, rather than elon musk tweeting intemperate things. i think many of his admirers enjoy these comments, and for us in the press, it gives us something to talk about. i don't think it is an area of risk. emily: some of those tweets do take time, though. max chafkin, thank you for keeping us up-to-date. watching.tock we are netflix continues to surge on its impressive first-quarter earnings report. the streaming company adding 7.4 million users in the period, easily topping analysts projections. the results, including higher earnings and an upbeat forecast, where welcome news to investors. year.ock was up 60% this

coming up, microsoft president brad smith joins us. y 34 major tech companies including microsoft, facebook, joining forces to fight cyberattacks. if you like bloomberg, listen on the bloomberg radio app and on sirius xm. this is bloomberg. ♪

emily: facebook, microsoft, and 30 plus other tech companies have pledged to protect customers from cyber attacks in a new place called the cybersecurity tech accord. however, notably absent from the sign-ups are apple, amazon, twitter, and google. on monday, u.s. and u.k. officials issued a joint warning about years of cyberattacks stemming from russia aimed at

both businesses and utilities, and some individuals. that was the latest in a series of russian threats to elections and a left total systems. to discuss, brad smith, microsoft's president and chief legal officer. part of this place, you are saying you will not help governments protect or perpetrate cyberattacks. talk about whether is a need for such an accord. >> i think the industry needs to come together on a local basis to strengthen cyber security. we need to be principled. there are two principles that are part of the pledge. the first is that we will step up the work to protect every customer, everywhere from cyberattacks, and the second is that we won't help governments launched cyber attacks against innocent citizens or enterprises. we will use those as our two -- north stars, and there are concrete steps we

can make to make those affected. emily: our governments asking you for help? absolutely. first of all, we get requests from governments every day to help defend against customers, and we are doing more in that space. in the world today, i think if your principles are unclear, you do run the risk you will be asked by governments to do things you will look back in hindsight and regret having done. we have seen that over the last 15 or 20 years. i think being clear about what we will or will not do, we give governments guidance so they don't have to ask us. . they know where we stand. . emily: you referred to this as the digital geneva convention, yet amazon, google, apple are not signed up. >> i think we will see more companies signing up in the last -- next few months. a lot of people are focused on a

wide variety of privacy and security issues. we have 34 major companies signed with us. we are also calling on governments to sign up for a digital geneva convention, which will put new rules in the road in place so governments understand that they can't attack civilians and the way we are seeing in the world today. emily: facebook has been in the spotlight for inadvertently allowing state actors to meddle in elections. why should we think of this as any more than an empty promise or a marketing ploy? >> i think that in the world today, it is important for companies to be principled. you can't be principled unless you define dearly and -- clearly and in a transparent way what you are doing and what you stand for. i also believe you are making a fundamentally important point. at the end of the day, people should not judge us by our words

alone. they should judge us by our deeds. this gives people a clear standard against which they can judge us. i think we should welcome that. now it's up to us to prove every day we can live up to this pledge. also under fire for data privacy. i'm curious where you think facebook went wrong, and whether you think more regulation is in big tech, since that can ultimately impact microsoft as well. >> i think it is the broader question that is most important. it's the question for all of us. we at microsoft called for national comprehensive privacy legislation. we did that in 2005, 13 years ago. this whole privacy issue does not get better with age. we do need to come together as a country, and we will benefit from having good laws in place. we will benefit because it will be a consensus nationally about what companies should do, and we

will benefit because that could play an important role in sustaining the trust and confidence of the public. emily: you have also announced a new defending democracy program to help prevent campaigns from being hacked, to defend against misinformation. can you give us some specifics about how you intend to do that? are you working with particular campaigns or particular states, are working to secure voting machines ahead of the midterm elections? >> the answer is basically going that.yes to all of we have identified four specific areas on which we want to focus with this new defending democracy project.the first is prevent -- protecting candidates and campaigns from hacking. the second is protecting voters from tampering or hacking. the third is supporting measures to ensure integrity in political advertising, including on social media platforms. one of the things the honest ads act will do.

the last is in some ways the hardest, the job we all need to do, to try to address the illful disinformation campaigns, sometimes from foreign sources. i think we have a lot of hard work ahead of us, but we need to get started. emily: last click question. you are announcing a new micro device product, a tiny little iot product, secured end to end. it could be anything from remote controls, works with google cloud. what are the dangers here you are trying to protect against? is ais, i believe, fundamentally important problem for the country and the world. this year, there will be a shift these world, 9 billion of small chips going into toys, refrigerators, thermostats, toys, and they will all be connected. if they are connected without

being protected, we have a much bigger cybersecurity problem than we do today. what we launched yesterday here in san francisco is a new offering. with a new and more powerful and more secure hardware chip, and a new and more secure hardware operating system, and a new security cloud service, we for the first time have a holistic solution. emily: microsoft president brad smith in san francisco. as always, thank you so much for stopping by. coming up, will the defense department change its win or take all strategy in the competition for the pentagon? we will talk about that next. this is bloomberg. ♪

emily: the defense from it not budging phrasing a contract or a cloud computing project, and they are not saying why.

rival contractors like oracle are complaining the winner take all approach favors amazon, biggest supplier of such services. a potential bidder says no commercial enterprise should risk a single cloud solution, and neither should the pentagon. coming come over $20 million was used to invest in european startups. will talk to two london venture capitalists to say where the money is. that is next. ♪ retail.

under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. mark: here is a check of first world news. that a sorry said press reports that a crew member -- the associated press reports that a piece of a plane was missing and

someone went out, and one person was killed in the accident which occurred at 30,000 feet. seven others were injured. >> at this point the ntsb's cousin find this is an engine failure. once we get there and look at it, we may say this is an uncontained engine failure. we know part skim off of the engine, but those parts a not have been in that part of the engine associated with the antection associated with engine failure. mark: the plate made an emergency landing in philadelphia. rod rosenstein wants to have more time to review former fbi director james comey's memos about president trump. rosenstein says the memos could contain confidential residential communications, or information on an active investigation. ministry iseign ordering families of diplomatic

staff in cuba to return home. the announcement follows mysterious health symptoms detected in 10 people were stationed on the island. global news, 24 hours a day, powered by more than 2,700 journalists and analysts in more than 120 countries. bloomberg. by david ingles with a look at the markets. as i looked at the early indicators of trade, a few things i want to mention. ilwinds.a you see a slightly higher start across the major markets in japan. 2.5 hours from now, and at best early on we are looking at a third or fourth of 1%, and futures at 1.3%. that being said, a lot to

consider today with china. mixed messages when it comes to try to come at opening up the auto sector with electric cars. morelso, introducing anti-dumping duties, and the pboc cutting ratios for the first time in a wild. hile. more from "bloomberg technology" next. ♪ ♪ this is "bloomberg technology". tesla'sour top story, manufacturing woes and shifting to overdrive for its model three

problems. after reports that the manufacturer was halting production on the sedan, we are now hearing it will begin around the clock production at its fremont, california plant. test that is also getting a boost from china, lifting limits from automakers in china in the next four years, and overseas companies can on no more a 50% with a joint venture in china. trying, theen failed to agree on the ownership structure with shanghai's government. now it seems every week there is a new announcement of money being raised for european startup investing, after a record year in 2017, more than a billion dollars but the work in the region, firms are raising new funds in 2018 to make the most of increased investment opportunities and. institutional interests i want to begin caroline hyde.

caroline, take it away. i not one butned fromc funds coming optimist ventures. funds,e announced new and yet raised over $2 million, and more than and four. where is the interest to begin in terms of money flows into a fund? >> we are seeing a shift in u.s. interest. we are lucky we have existing investors, and one of them is bbb, and extra demand is coming from u.s. investors. you are seeing europe as a attractive place to invest in venture. they are sophisticated investors, and they have been doing this for decades.

they have seen how successful that has been come and they eawest toa wave from east, and they see the next land of opportunity as europe. caroline: and fundraising continues at optimist ventures. you say this sets you up to be able to continue work comes to new ventures. are about the checks, valuations getting bigger and the opportunities you see? >> we see a growing trend of talented entrepreneurs coming to us with fantastic ideas with global ambition. increase inan funding size over the last 10 years. series a used to be 2 million

pounds, and that is not uncommon to see it at this level. in terms of valuations, they are stabilizing more in recent months. caroline: you focus on software fintech.and thin t are they going anywhere, or is london a tech hub? >> talented entrepreneurs are everywhere. counted on to printers across europe, and u.k. is an important hub for software and fintech. caroline: despite brexit? >> it hasn't had an impact yet, because the ecosystem is super important to be able to hire important people at all levels, and the u.k. is unparalleled for that. >> i think london attracted $3

billion in investment last year, short of $5 billion. that is london ahead the rest of europe within our portfolio. we backed entrepreneurs who set stockholm and central and eastern europe. the most talented art vendors are seeing the success from their peer group across europe, and starting out wherever they might be. caroline: and what about the industry groups, and the verticals? like magic pony, which is video. what verticals are you particularly seeing? >> we are both in taking a risk with entrepreneurs, but we see a concentration in retail and businesses coming from a consumer perspective. players,ave b2b

helping retailers sell more effectively. digital health is a focus for us, and we have three or four businesses, including big health , which are going onto big things at the moment. to talk aboutnt an area of focus for you, which is diversity. how are you ensuring that companies scale with the effects you want to see with the diversity want to see? hard for two white males to talk about it, but we have to do what we can, and it starts with governance to set the right direction, and everyone has to do what they can. and we hire the best. looking fo to counteds, we have female venture capitalists, and we are trying to encourage female founders, which are still underrepresented -- in every way we can.

on governance, we can talk about where europe is better than u.s. governance. normally ceo and chairman are split, and within board members there is more concern within the culture. all research shows this leads to a better outcome so that is the big driver for everyone. caroline: let's talk about outcomes and exits. i mentioned a couple of companies you are backing -- we and ipo's when it comes to companies you back in the past. draws in, butit what about 2018, i you both looking at companies that could be exiting? we see more ipo's? you see a growing cadence of companies successfully raising

money or listing, like in the case of spotify. we are also seeing a growing cadence of entrepreneurs where the confidence to raise additional money in the private markets and built for a bigger outcome. the investor groups and syndicates around those offenders are being patient and willing to back an entrepreneur in order to see a bigger outcome. we were talking earlier about one of the earliest businesses to ipo for more than a billion dollars, and that was unusual at the time. with anyou have spotify ipo of $26 billion. it sets a new ceiling and opportunity for european entrepreneurs to target. exit is important to us, carry isa big deal -- a big deal. entrepreneurs better serve

business as a public business, and people are patient. we have been lucky to return money back to our investors. it makes our investors patient, so everything is a virtuous cycle, which is a big change in europe. caroline: emily, i will hand it back to you. hyde in london, thank you. after acquiring a magazine, apple is planning a netflix for news and its latest services push. what to expect from the tech giant, next. this is bloomberg. ♪

emily: walmart is rolling out a revamped website and once more customers to their away from amazon for a more personalized experience. walmart says the redesign is from feedback from customers and can help we gain momentum it lost over the holiday period. but walmartjet.com, focuses more on its own website. apple plans to integrate its recently acquired magazine app with its own premium su bscription offering.

to buy texture last month, and it allows users to subscribe to hundred reasons at 9.99 per month. joining us is mark gurman who covers apple for us. we have seen the challenges facebook is facing in the newsfeed and bring a provider, why does apple want to get into this now? mark: news is an important part. ofy want to be in every form media, they have music, tv shows, books, apple music. it is something to think people will subscribe to, so they will bolster the apple news app. what you can do now is subscribe to individual publications. i know people magazine is therefore 2.99 per month. there is some newspapers for a different price, and apple wants

to put it together and paid one monthly fee like you do with netflix, and get access to a bunch of different newspapers and magazines. emily: is this something people actually want and pay for? mark: it is a good question, and it is about how much will are willing to pay. some publications have pay walls, so imagine being told you can pay five dollars and get access to all of them in one feed. online get access to the digital catalog, so that could be compelling to some, but not to others. emily: and what about publishers? we heard that adversarial andtionship with publishers facebook, is a something publishers will jump on board? mark: apple has an easy time getting publishers on board.

apple has struggled with video-based content, with tv shows being able to create a service that integrates all of that and taking stuff away from the video content makers, the tv networks, comcast and time warner's of the world. publishing involves music, i don't know about the behind the scenes work, but they have been able to pull it off. it is a no-brainer that they want be able to do it again. emily: ideally this adds to apple's bottom line, and we see it become a bigger slice of the pie. how much do you think this could add to apple's business knowing a lot remains to be seen? mark: i would think it adds much , but another way to look at it is, are they taking away eyeballs from other companies? facebook has its news integration and newsfeed, and google has google news.

there's a cost to not doing something as well, and that factors into decisions made by tech companies lately. you,: mark gurman, thank as always. coming up, planting the seed, a venture capital firm and why she thinks we need another vc firm. that is next. this is bloomberg. ♪

weeks,in the past few billions of dollars were wiped out of tech stocks, and in the hot seat with facebook. shares have been mostly in the red that they political consulting firm working with the trump campaign mishandled data of tens of millions of users. new questions are asked about data privacy with regulation looming. how is it impacting early-stage investing, aiming to be the next billion-dollar tech behemoth? to answer that, i welcome the

managing partner of the five, a venture capital firm that closed with $151 million in funding in 2017. thank you so much for joining us. i am sure you are following the facebook news, and you know the answer is often that early stage venture capitalists don't think about these things. but with tech regulation looming with bigger questions being asked about tech fx, is it impacting decisions you are making on the front lines? question, andreat when we make investments we make them for the long-term. we are seeing a lot of daily changes in the narrative around what is going to happen with regulation and facebook. we have some time to figure that out. one thing i will say is that if you like historically and take a large monopoly that do get regulated, it oftentimes creates opportunities for venture investors.

i look forward to seeing how this plays out. emily: you are credited with fund nest in your earlier days, companies at the center of issues around data privacy. you fund nest in your earlier think -- do you think he think about these things are going to fundamentally change as we bring more technology into our homes? trae: absolutely. whenever you adopt new technology, the consumer has to make a trade-off. is the privacy i am giving up for the benefit i am receiving? it is not always obvious. when i invested in drop cam, it wasn't clear that people wanted cameras in their house. what we see says then is the benefit people get from a piece of mind, the ability to drop in and see what is going on. and in the important element of security and pepsi let companies security at privacy

, and dialogue with customers around privacy. post, if werote a need another spotify, and the rhetorical question was answered with no, so what do you plan to do differently? trae: as i was looking at leaving kleiner, a lot as if i would start a new font come and it wasn't obvious to me in the beginning partly because the venture is overfunded. once i was working closely with entrepreneurs and helping them navigate raising money as they went forward, that perspective gave me a ton of different views of the ecosystem. that money is not evenly distributed across teams through late stage funding. realizedartner and i

when we came together to start our new venture firm is that the early-stage venture funds have gone bigger. incrediblyu have flourishing system, it left a gap in the middle. we were met with founders who had great ideas, some nice early traction, but not enough to raise a 10 plus million dollar round. their what did a venture capitalist to invest money, million. $6 is important to get them to the position to get funding. emily: you are investing with who comete agents through the success of tech

zillow, why this? trae: several reasons. one thread is we love investing in what we call authentic founders. founders who lived this problem and understand it in a way that ouldical pick founder what not. he was a real estate agent for eight years, and he understood. this problem his brother was a tech found there, so they can do up and started themselves from other folks in the tech industry to figure out how to solve this problem for themselves. this, his address customers and agents can do a whole new level of authenticity. question, you are very involved in the elephant in the valley survey, talking about how big of a problem harassment and discrimination is across the industry, and help increase

anding to female founders, diversity venture capital firms. is this a movement or a moment? we have 20 seconds here. trae: it is able the movement, and we are starting to see critical mass. we see a number of women in positions of power in firms writing checks and starting new firms. it is starting to make a difference. managing partner at the defy. that does it for bloomberg technology. ♪

♪ haidi: u.s. stocks rally for the second day and s&p 500 having its highest in four weeks. is among the day's winners, searching after subscriber growth tops estimates. and wider tech ops strive more gains. growth and the seeds of a slowdown. >> and the historic meeting moves one step closer.