mark: you are watching bloomberg technology. president trump says the u.s. and north korea are speaking directly in what he calls extremely high levels ahead of a potential meeting with kim jong-un. the president spoke during a meeting with japanese prime minister shinzo abe at the president's private club in friday --in florida. one passenger was killed and others injured after a southwest airlines jet blue and engine -- at 30,000 feet. the flight 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. they say 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 company plans to conduct racial bias education classes to prevent discrimination inside its stores. blackve comes after two men were arrested after sitting inside a starbucks cafe in philadelphia. global news 24 hours a day powered by over 27 journalists in over 120 countries. this is bloomberg. ♪ ♪ ♪

emily: i am live from los angeles. this is bloomberg technology. ibm takes a tumble. it stock price plunging despite strong sales. we look at the first quarter results. tesla's second timeout. the electric car manufacturer stop production on its model three sedan and sent workers on. now workers are asked for 24/7 shifts. apple pushes the deeper into news, but can a prescription make it as successful as apple mys -- music. ibm shares tumbling after the first quarter despite a win in its campaign to reverse years of revenue decline as it reported its first year of growth. ibm's new strategic imperative

unit saw a 50% rise in revenue from the year before. this including the company's clout, analytics and mobile -- walk us through the main weaknesses here. >> the biggest weakness is gross margins. this has been an issue for some time. even a share, we should see slight decline in gross margins. the pace of decline is not going to be as bad as last year. this remains the number one concern that is the driving out-- down the stock. emily: this that outweigh security, cloud, analytics? >> that is similar to what it's been happening for the last year. i would not get too excited about the push and currency. the profitability of the product

you are selling, they have more investors in cloud and lower and theno begin with have pricing pressure on legacy i.t. contracts. rily: let's dig into ibm's ole into the bigger picture of tech regulations happening here. ibm will probably benefit from increased focus on customer data privacy as a result of gdp are -- gdpr. >> ibm is saying, you have a large amount of data in your own data centers. we can give you a hybrid cloud environment that is a mix of your own data center and our private cloud and you can make the data back and forth but it will still remain in your domain. that their marketing push around it. they have seen growth

in the security business were people are using consulting and security products to make their company more gdpr compliant. emily: if that is a marketing spin, do you buy it? >> the club spenders are compliant. you have cloud application vendors, they are gdpr compliant. does the client want to move a large portion of infrastructure into a public cloud environment or are they happy with a hybrid cloud environment? in the case of a public cloud environment, they do have a public cloud offering the back is to amazon and microsoft and google. but if they look at a hybrid cloud environment, some goes to microsoft and some goes to ibm. ly: ibm is making a push

into emerging technologies. let's talk about blockchain's. ibm is really trying to be on the forefront of blockchain's. what do you make of how much of these efforts will improve the business. business?n mark -- it, 18, 19 ak at quarter, these are very small portions right now. but if you are investing in blockchain's, ibm has the hardware they goes with it. they are trying to use their hardware, whether it is consulting are using their engineers to create a custom solution. whether it is blockchain, i.t., artificial inpatients, -- artificial intelligence, they do have a presence.

but revenue is declining and there are still a lot of legacy products. emily: we will continue to follow ibm shares. as we have been reporting all day, tesla has suspended the production of its model three sedan. this is the second time that the car has had to flip the brakes on the model. sources, elon musk is ramping up production of the sedan. elon musk spent time a knowledge and production problems and are doing with the economist magazine saying tesla will be profitable. a lot going on with tesla and production. to answer that question, i want to bring back bloomberg businessweek, list -- columnist max.

a lot of juicy stuff in here from production halt to 6000 model 3's a wekk. -- week. musk it seemson to be working 20 47, the 24/7 shifts are shifts. it is not as if these employees are working around the clock, although many executives are. memo musk is saying in this e to have then is shutdown and ramp up. we saw a similar shutdown up that allow ramp them to hit this 2000 unit milestone. he saying they want to be at 6000 by the end of the second quarter.

the idea here is to build a little cushion said that even if they fall short of the 6000, which tesla did not want to do, they'll probably get 5000, which is the goal they have been promising to investors all alon g. there is information about a plan to add more employees. profitlly big push for to make sure tesla gets to profitability. emily: shares are up. we are burning the midnight oil to burn the midnight oil. the production halt, how is that bad news in the grander scheme of things? >> i caution people reading into this news too much. is, at lots of

companies, you have to reset the line are make sure the tooling is right. there are reasons to stop production that are not bad. but there have been some of these unexpected things and that could cause someone who is a to think --skeptic this company is over its head. but if he goes well, elon musk will look like a genius. emily: what do you make of his comments on cbs that he overdid it on automation. >> one of the key things tesla had been talking about as a differentiator was a this is going to be the most automated car factory in the world. that was going to allow them to hit these ambitious production numbers. it is harder to plug people in.

in the factory, when you start pulling different tidbits it is tesla moving towards more of a traditional, human focused manufacturing process which is why they are adding all these employees and shifts and why they have to focus on profit. they spent all this money on these machines that are supposed to save money at night have to add employees and that is going to create cost pressure on a company that is already losing money. up but at whatre point our customers asking for their deposits back? >> this is a superpower tesla has. people are super fans of this company. for people who have already put down a deposit, this is not their primary car. we are still a long ways off

from that. the longer this a drag out and you will start to see other car companies coming out with compelling products, the greater the danger is for tesla. is not about these cus tomers asking for their money back, -- if all they have is the customers who have put in deposits, it is not going to be good enough. they need to be putting in new customers every year to get the vision elon musk is talking about. emily: i want to acknowledge the tweeting. elon musk continuing his battle with the media. another tweet toughie about how ideas- talking about how

come into his head. to remember.asted >> he is always been a putting nations sort --ignatius -- p ugnatious sort, that is something people like about him. in terms of the tweeting, the greater area of concern would be all these side projects. he's apparently hiring humorous from the onion. it is more about distraction in terms of possible danger at tesla instead of elon musk tweeting intemperate things. a lot of people in my his intemperate comments. s doy: some of those tweete

take time. watching, we are netflix continues to surge on its impressive first-quarter earnings. 17.4 million years added -- users added in the period. netflix rose as much as 9.8% to an all-time high on tuesday. the stock was up 60% at monday's close. microsoft president brad smith joins us. why microsoft, facebook and dell are joining forces to battle cyberattacks. this is bloomberg. ♪

emily: facebook, microsoft and 30 other tech companies have joined the cybersecurity tech record. absent are amazon, apple, twitter and google. aboutssued a warning cyberattacks coming from russia aimed at businesses and individuals. it was the latest of a series of russian threats to elections and electoral systems. joining us is brad smith. part of this pledge, you are saying, you will not help government protect or perpetrate cyberattacks. why is there a need for such an accord? >> our country needs to come

together to strengthen cybersecurity. there are two principles part of this pledge. the first is we will step of our work to protect every customer everywhere from the cyberattacksans and do a not hep government wants cyberattacks against innocent citizens or enterprises. there are a number of concrete steps we can and will take to make those effective. emily: are governments asking you for help for them to perpetrate cyberattacks? >> most importantly, we get requests from governments every day to help defend against customers. in the world today, if your principles are unclear, you do run the risk you'll be asked by governments that you will look back in hindsight and regret having done. we've seen that ever the last 15

or 20 years. by being clear about what we will and will not do, we can get government's guidance about where we stand. emily: you refer to this as the digital geneva convention and yet apple, amazon and twitter are not signed up. why not? >> we will see more company sign up in the coming weeks. we have 34 major companies with us tday for this tech record. we're calling on governments to sign up for additional geneva conventions. a new convention that will put the rules of the road in place so governments can understand they cannot attack civilians the way we are seeing in the world today. emily: facebook have been in the spotlight for inadvertently

allowing state actors to battle in elections -- to meddle in elections around the world. >> you cannot be principled in my she defined clearly and in a transparent way what you are going to do and what you are going to stand for. 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 of how they can judge us. emily: facebook also under fire for data privacy. i'm curious where you think facebook went wrong and whether you think more regulation is a necessary in big text, >> it is the broader question

which is most important. we at microsoft called for national comprehensive privacy legislation. we did that in 2005. 13 years ago. this will privacy issue does not get better with age. we need to come together as a country and we will benefit from having good laws in place. there will be a consensus and nationally about what companies should do and it will play an important role in sustaining trust and confidence of the public. emily: you have announced a new defending democracy program to prevent campaigns from being hacked. can you give us specifics about how you intend to do that? are you working with particular campaigns or states or working to secure voting machine ahead

of the midterm election? >> we have identified four specific areas where we want to focus with this new defending democracy project. preventings campaigns from hacking. the second is protecting voters and the third is supporting measures to ensure integrity and political advertising and social media platforms. the last is really in some ways the hardest. it is the job we all need to do to try to address the will for --willful disinformation campaigns we're seeing from foreign sources. in some of these areas, we see back steps we can take and we have a lot of hard work ahead of us. emily: you are announcing a new micro device product, a tiny ioc product that is secured to

anything from toys to remote controls, works with google cloud, what are the dangers you are trying to protect against? >> this is a fundamentally important problem for the country and the world. ship 9ar they will billion of the small chips going into toys, refrigerators and thermostats and they are all going to be connected. if they are connected without being protected, we have a much bigger cybersecurity problem than we do today. what we launched yesterday in san francisco is a new offering and with a new more secure hardware chip, any more secure operating system and a new more secure cloud service we are for the first time have a whole list of solutions. emily: microsoft president brad smith in san francisco.

thanks so much for stopping by. coming up, will the defense department change its winner take all strategy in the competition for the pentagon cloud?

>> the defense department is not budging from its decision not to award a single project for a cloud computing project. it is not saying why. rival contractors like oracle are complaining that the winner amazon, approach favors the biggest provider of cloud services. another potential bidders says no commercial enterprise should risk a single cloud solution and neither should the pentagon. coming up, over $20 billion used by venture capitalists in europe just to invest in european-based startups. we talked to two london-based firms it's a europe is where the

money is that. this is bloomberg. ♪

>> it is 11:29 in hong kong and beijing. l.il highly line with -- chinang duties on has made it clear does not want a trade war but as promised to defend its own interests. china cut 1% of the reserve ratio requirement for banks, freeing $207 billion. the bboc says most of the funds will be used by the banks to repay medium-term financing.

the central bank hopes to reduce funding will ease conditions for businesses and individuals. u.s. airlines face possible disruption as negotiation is expiring and no sign that negotiations are imminent. they're looking from help from the state department after pulling out of talks this week. following the quickest and cheapest route to asia. economy would be hit hard by a combination of a global tariff war and the fed tightening cycle. it is seen as a u.s. ally. the report says it could also lead to import inflation, hurting indian purchasing power and investments. that would have 2.3% of india gdp growth by 2022.

global news 24 hours a day on air and on twitter, how would buy more than 2700 journalists and analysts in more than 120 countries. i'm heidi lunn. this is bloomberg. >> i have a check on the markets. asia stocks lighting for the first time this week, but shares in china are sliding as tech and automakers fall. falling further day. tech players are rising after exports rose by double digits. falling on bets that trump will not settle abe on trade. stocks are climbing in the meantime. let's check in on chinese debt. the 10 year yield is falling nearly 15 aces points. -- basis points. alumina prices are soaring towards $2500 a ton, while oil

is rebounding. a check on some movers. you can see the chinese bank stocks are rising as they stand to make high profits. icbc is a fourth day drop in hong kong. ♪ emily: this is "bloomberg technology." back to our top story, tesla's manufacturing woes, 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. tesla 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. tesla has been trying, the

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'm now joined i not one but two vc funds coming from optimist ventures. you have announced new funds, and yet raised over $2 million, and more than you aimed for. 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 invest in a wave from west to 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. what about the checks, are 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. to has been an increase in 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 service and fintech. are they going anywhere, or is london a tech hub? >> talented entrepreneurs are everywhere. you see 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 up in 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? yet companies 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. we also have b2b players, 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. caroline: i want to talk about 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? >> it is 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. lucky for us, we have to counted 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

have seen trade and ipo's when it comes to companies you back in the past. obviously brexit draws in, but 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 outcome. dollars, and that was unusual at the time. and now you have spotify with an ipo of $26 billion. it sets a new ceiling and opportunity for european entrepreneurs to target. >> exit is important to us, carry is 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. emily: caroline hyde in london, thank you.

coming up, 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. walmart but jet.com, but walmart focuses more on its own website. apple plans to integrate its recently acquired magazine app with its own premium subscription offering. apple agreed to buy texture last lost over the holiday period. 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 has been facing in the newsfeed and being a provider, why does apple want to get into this now? mark: news is an important part.

they want to be in every form of 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 there for $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.

you can get access to the online digital catalog, so that could be compelling to some, but not to others. emily: and what about publishers? we heard that adversarial relationship with publishers and 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 warners 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 don't 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. emily: mark gurman, thank you, 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. ♪

emily: in the past few weeks, billions of dollars were wiped

off 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 bring in the managing partner of defy, 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 i 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? >> that is a great question, and 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 helping fund nest in your earlier days, companies at the center of issues around data privacy. you think -- do you think how we 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 dropcam, 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 privacy, and have been really important at laying down the right dialogue with their customers around privacy. emily: you wrote a post, if we 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. what my partner and i realized when we came together to start our new venture firm is that the early-stage venture funds have gone bigger. so while you have incredibly 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, three two $6 million. is important to get them to the position to get funding. emily: you are investing with real estate agents who come through the success of tech platforms like zillow, why this? trae: several reasons. one thread that was see is we love investing in what we call authentic founders. founders who lived this problem and understand it in a way that atypical pick founder would 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. when david addresses his customers and agents can do a whole new level of authenticity. emily: last 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 funding to female founders, and 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. emily: managing partner at defy.

thank you so much for joining us. that does it for "bloomberg technology." we will see you back here. this is bloomberg. ♪

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