tv Bloomberg Technology Bloomberg July 9, 2018 11:00pm-12:00am EDT
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groupson seeking a buyer. could this be the best solution for a company trying to turn things around for years. to our top story. falling as much as 6% on the first day in trading in hong kong as a escalating trade war dampens the biggest offering in two years. the weak opening made that the chinese tech company but it was highly unanticipated i.p.o. >> we are a new species and a we can do e commerce. i don't think there is anything like that. >> what can you do with the device. i think pushing away from the hardware back grouped into a diverse offering makes a lot of sense. i commend them for doing that. that is a good move. >> [indiscernible]
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>> you really got to be local specific when you develop services and i'm not sure it is that easy to copy and paste it. emily: the managing partner from m.s.a. capital along with mark who covers consumer technology. what do they have to prove? >> they have a lot to prove. they are very localized to china and some of the more developing markets like india and doing very well in india and china, but that is one portion of the world. there is the whole trade war tension right now and the ability for china to get their
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devices in the u.s. and europe has become a difficult problem. emily: our tech reporter, shelly, how much of a disappointment is this? >> it is a disappointment because of how much expectations were built up. if they wouldville come to the market. as it were, it was a big accomplishment, eight years in existence and becoming one of the biggest smartphone companies. instead of saying this is who we are and what we make, we are this $100 billion company that is an internet businesses. that is where the mismatch lies. emily: would you be a buyer? >> i am. emily: at twice the price of apple? >> i am. the business is underestimated and misunderstood. his develops a delivery device for multiple services.
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they have to really disrupt and destroy an entire business and this is i.o.t. they put the devices in the hands of everyone not just in china but in multiple merging markets and gives them a platform to deliver services at a high margin. emily: mark, you cover apple. is this worth twice as much as apple? >> if you look at unit sales that apple is selling at, it is unprecedented, but if you go in terms of delivering services across the world, that is where the lucrative macts are. you see them all shifting. they are a china-based company and have so much companies and everyone else trying to get a piece of the pie. it is a whole different world, and it is not ahead of the pack. emily: you heard the company make the argument that they are a new species, are they really different? >> there is nothing new there.
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>> in the i.o.t. space, you had these makers, like fitbit, they wiped all of them out by making a product they can sell at a tenth of a price. it is in their early days. things like health care, insurance, finance, all kinds of other apps they can plug you into, it is unprecedented. but when you buy their televisions, you are forced to watch their tiesments. but it is superior quality, you have to take their services. emily: how much is this being caught up in a trade war? >> that's the line we are going to hear from a lot of people, that this is bad timing. this isn't great timing for the macts if you look at china and hong kong. both markets are down.
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there are a lot of jitters about the trade war. they are not in the u.s. their business isn't going to be affected by anything having to do with the trade wars. so it won't be that impacted by a trade war at least in the near future. emily: mark, you have done a ton of reporting including new iphones, what is the hardware that they will be up against? >> i think there is an opportunity for a player whether u.s.based or china-based to come in with a higher-end phone. we have seen companies like one-plus. and apple is working on a cheaper iphone. no one has nailed it that is good and cheap that people are going to buy in high volume. they have this opportunity. and in this climate with this administration, it doesn't seem plausible is going to be able
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to have that success in the u.s. emily: you are an investor in other chinese companies that are planning to go public soon, do you think they could change plans? >> i don't think so. i think it's tough timing. they were out the first gate with the dual structure. it is a difficult position for them. and global investors understand it because it republically indicates models under one platform and shows how it integrates more than this new species. the combination of multiple business models under one roof really difficult to understand. emily: they have the mainland china half of its listing to come and how is it going to work and could the company recover? >> that seems to be seen. and they tried to push for
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it. they want to be part of it, but there is a big disconnect what regulators want and customers want. it is going to take six months and the regulator or a year or could never happen. there is this new thing that no one has been able to figure out and they were supposed to be the test case and that didn't happen. we'll see if other tech companies, established companies, come forward first and might lead the way for a company like them to come after that. emily: the speculation about its attempts to enter the u.s. market with phones has been going on for years. do you think they could be the one to offer that lower price, high-end handset, what are the chances? >> it could be and should be them. but the political climate isn't going to allow it.
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there is a big emergens of the u.s. not wanting china-based companies wanting their products in the u.s., et cetera, et cetera. it will be difficult right now. it will be seen as difficult for the next four years, seven years or even longer or if this administration changes their stance. emily: thank you mark and shelly and ben. there is a new sign the long struggling recording music industry is renewing its come back, china plans to spin off its music business. it will let investors bet on the market so services have brought new life to a new industry. for the second year in a row, there is double digit growth. music lovers spent $8.7 billion, up 17% from 2016. charging up for an electric cooter turf war.
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alliance is being confirmed. will it give the company and edge in the brewing two wheel turf war? joining us now discuss is alliance c.e.o. thanks for joining. this partnership with uber, how will it work? >> they will start investing and on top of that, they will be co-branding and make our scooters available on their app. emily: are we going to see the uber sign? >> we are figuring out the details. emily: how much business will this drive for you? >> it's a good question, that we don't know, but the privilege of this partnership. this is a new space and thrilled to have uber as our partner and test it out. emily: $1.1 billion valuation is significant. what are the numbers to back
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that up? >> this is a massive market. transportation, mobility. and first and last model transportation has been a challenge for a lot of the high-density fits. so we have seen a lot of people starting to use that for fun. but now, a lot of people are using that for a commute and adapt it into their daily life. as we look at 2013 when uber was first around. and then, now, look at uber -- i think the most important thing is we are creating a movement that changes people's behavior. emily: how many rides a day? >> i would say we are going -- we have already done over six million so far in eight months. emily: it has been said this business could be more
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profitable because you don't have to pay drivers. is that a fair assessment? it's hard to believe you could get more money making bikes and scooters. >> we don't know about their economics, but not paying the drivers and cars is a big cost reduction for us. but more importantly, we are solving the higher frequency use case. part of people, most of the transportation needs every day basis. so i think that is a big foundation of our potential market. emily: there are challenges in every city and every city is unique and in san francisco there is a freeze on scooters and will be going to pick size companies that can have it out nd you are applying for it right now. what can you promise the city and the residents who got retty annoyed?
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>> we share the feedback and one thing that we get from the other, we take the city relationship. before going into any market, we talk to the city officials and the department of transportation and we hear the feedback from operating about 10-12 weeks in the past. and implementing a lot of exciting features. after each ride we ask the riders to take a picture so people are held more accountable and hiring locally and we have an operation team on the ground to make sure things are in an orderly manner. emily: you are taking a none-uber approach? >> we want to do the best for the city. emily: and there are several different companies that seem to provide the same thing. what gives you an edge?
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why isn't this just a commodity. >> every major player move here and say this is a huge market that we need to have more actors and help solve the problem. we are excited about potential competition and working with the cities and making sure that we are always customer first. not looking too much on the competition but more focused on the product and customers. emily: speculation that you might provide a two-seater electric car, is there anything to that? >> we can't share too much about that. anything that using that and not available now and says something that we can do better than everybody else, we will share more. emily: this is a lot of money you are raising. >> we are ambitious. we want to serve more cities
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and more users. we are more live in more density markets with bikes and scooters. by the end of the year, we will enter and serve over 100 markets. and we'll keep focusing on the products. emily: you doll bikes, scooters and e-bikes, are they all manufactured in china? >> yes. emily: this trade war, is that impacting you? >> we are analyzing the impact, but so far, nothing. but the impact could be minimum, because the business model just works very well. emily: thank you so much for stopping by. i will be watching and i will be watching the streets. it could be a massive week for media. we'll discuss as disney, comcast and fox jockey for power and assets. this is bloomberg.
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emily: samsung electronics pened the largest mobile phone factory in india on monday. it will produce 120 million smartphone units a year like the galaxy x 9. and note 8. it was inaugurated by the indian prime minister and south korea's prime minister. it became the second largest smartphone market after china. they are the following. a major week ahead for media. the biggest industry names will gather in idaho for the allen and company conference and we could get it from comcast in the bidding war for fox assets
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or a higher bid from fox as it competes to buy sky in the u.k. jerry, what is comcast's next move? >> that is what everyone is looking for. one of the combattles going on -- of the m&a battles going on right now is between comcast and disney over the fox entertainment assets. and disney has the upper hand and has the higher bid and i think a lot of people are waiting to see what comcast is going to do and come back with a higher bid. emily: what do we expect in does disney or comcast have the upper hand? seems like bob and rob have the upper hand. >> i think a lot of people are expecting comcast to come back nd top disney's bid.
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and we could have a bidding war that continues on into the summer. emily: so what does james murdock want? >> looking to maybe do his own firm. but rupert is calling the shots and there is a lot of speculation that he would prefer to sell much of his empire to disney and not to comcast. there is a history of blood blood that goes back years. these are twore media moguls that have been duking it out for decades when the cable industry was in its beginning stages. disney has a higher bid. and there are tax considerations and the murdocks -- we reported they would make more money by taking a disney bid than a comcast bid because of the tax considerations. so there's a lot still to play out. brian roberts, the c.e.o. of
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comcast is not easily deterred and a lot of people are expecting him to come back with a higher offer with the fox assets. emily: fox sky situation, how does that add a wrinkle here? >> while this whole battle between disney and comcast is happening over the fox assets, there is a battle over sky which is arm pay-tv provider. comcast has the higher bid and have a deadline of this friday to formally make their offer to the sky share holders. fox is lining up financing to potentially top comcast bid for sky. emily: i do want to ask you about another story the "new york times" obtained a recording a town hall in which the new nth executive is peaking with hbo's and
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insisted that hbo needs to make more money and scale its quality a la netflix, is that ossible? >> they want hbo to make more content. really, if you think about it, hb omp is competing with netflix and you have to have enough content so people just don't watch "game of thronse" and when the season is over and then re-up again. you have to have a steady diet of good quality content to keep people on a streaming service different like a cable company if you want to cancel, it is a ain in a neck. i think at&t looks at the
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future and realizes that hbo does a lot of quantity but increase quality. emily: will they have the bottomless budget? >> at&t has not put a number on how much money they would like hbo to spend on original content. they said they would like to see them spend more but we haven't seen the details of how much they want to spend. netflix has very deep pockets and hard to imagine that at&t would be willing to compete on the same level as netflix. hbo has been competing with net flicks and hasn't put out much content but seen growth in their streaming service and the amount that emmies won is not going down. they have put a premium on quality and now at&t is coming in and saying ok, we need you to make more. emily: thanks so much.
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♪ emily: this is "bloomberg technology." i am emily chang in san francisco. our top story, hong kong's biggest coming out as xiaomi makes its public debut. it's public value is $50 billion, the world's third biggest publicly traded smartphone maker. stephen engle has more from hong kong. >> xiaomi shares fell out of the gate on its ipo. a lot of uncertainty about this company and its lofty valuation, more than apple, facebook, tencent. also, is it a low-margin handset manufacturer, or is it like the chairman lei jun says, a broader internet services
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company? oh, and also there is the growing backdrop of a trade war between the u.s. and china that has dampened sentiment. the company says it is a tough one to pigeonhole. >> we are a new species. we are in internet company that can do e-commerce at the same time. >> xiaomi is now a $50 billion company, the third largest in the world for handset manufacturers, but a far cry of an earlier estimate last year of a valuation of $100 billion. the size of the ipo also scaled back, down $3.1 billion from an initial estimate or aim of $10 billion. one dampening prospect was the elimination of a corresponding listing in china in shanghai of a cbr, china depository receipt. even the regulator in china shared concerns about the lofty valuation and true nature of
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ts business. emily: here is more of stephen engle's conversation with xiaomi's cfo, where they discuss the outlook for u.s.-china relations. >> we are and new species, and internet company that can do e-commerce and hardware at the same time. >> how are you going to go from 80% of your revenue right now in hardware and handsets, lower margin handsets. lei jun has spelled out the vision, the ecosystem of services, video, music and other things. how will you, and over what time frame, see -- >> internet services is to provide a better user experience. on top of this, there is a highly monetizeable source.
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by the first quarter, close to 10% of revenue. the trend is this is becoming a bigger part of revenue going forward. >> lei jun said he wants eventually more than 50% of revenue from overseas markets, not just selling handsets, but services. you are doing well in india. what is the party and how would you crack at the u.s. market? >> the priority is the user expenses good. we are trying to do this internationally, including india and indonesia. we think we will expand this to other countries as well. >> how are you affected by the negative trait sentiment? >> we are long-term positive. right now, we don't have operations in the u.s.
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the impact is minimal. >> the cdr, had to scrap that. will that be resolved over time? >> -- >> was it a matter of you had to list now? the last round of financing was 2014. how critical was this for you? >> it is important and a company's evolution. for us, what we need to focus on is the long-term value of what we can deliver. short-term fluctuations and tightening of the market are important, but not the party. >> that was xiaomi's cfo speaking to stephen engle and hong kong. emily: turning now to twitter, the cfo trying to dispel concerns that a crackdown will impact company growth. shares fell 10% monday after a
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washington post report that the rate of suspensions had more than doubled. the stock compared losses after the cfo tweeted, "some clarifications. most accounts we remove are not reported in metrics because they have not been active for 30 days or more or they are never counted." joining us is selina wang. what is happening? >> a delayed overreaction on the part of investors. it confirms what twitter said themselves two weeks ago. i reported they are tripling the amount of accounts they are identifying, so about 10 million accounts every eek. they are stopping more than 50,000 spam sign-ups a day. this will have a marginal impact on monthly active users because most of these automated accounts are not active every
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day, every month. in addition, a lot are stopped before they join the platforms of they are not counted towards is metrics. emily: that is a lot. >> what should be concerning is the great improvement does bring into question just how much of twitter is actually fake. is it 5% of active user accounts that are fake as witter said? or is it higher as independent researchers say? why didn't the company do more o stop this earlier? the actual disclosure of these numbers should be a relief for investors, not a cause for concern. emily: how are they purging these accounts? is it ai, human? >> they created an internal task force ever since they had scalating concerns and
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criticisms from lawmakers that they did not do enough. they dedicated engineering resources to solving this problem. they want to stop these malicious accounts at the inception with these algorithms. i reported a few years ago that a former employee discovered a huge number of accounts that were dormant from russia and ukraine, and that at the time in 2015, the company did not do anything about those accounts. that shows that twitter has come a long way since 2015 when they were prioritizing user and revenue growth over spam and automation. had that employee come to twitter today, they would have deleted those immediately. emily: how are users responding? >> i think it is ultimately a positive reaction. emily: are any users, organizations behind these accounts? >> i have had tweet saying they are removing followers because of this, but others say it is good.
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it is time. it will decline if they allow the toxicity to run rampant on the platform. a big sign this is a positive move for the company as a statement account from unilever two weeks ago when i first reported the new account suspension. unilever in february was threatening to pull hats off of also jeanette works because of the toxicity of them. after the new disclosures from twitter, they said this is great and we are happy about these moves to get rid of fake accounts on twitter. emily: twitter stock has been up 70%. could this dent the turnaround? >> i don't think this will dent the turnaround. we saw a note from jp morgan that said this is a buying opportunity. there has been a misunderstanding about these disclosures and the impact it will have on monthly active users. this is a positive sign that jack dorsey is following through on his vision to increase the health of the
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platform. emily: selina wang, thanks so much. meantime, alibaba in talks with bt about a cloud services partnership as it challenges amazon's dominance in europe. alibaba has an arrangement with vodafone germany. it has become key to alibaba cloud success out of china. the company has pulled back in the u.s. as trade tensions have escalated under president trump. coming up, tech earnings and season around the corner. what to expect from netflix, alphabet, facebook, and more, next. could it be the end of groupon as a standalone company, and what tech giants are interested in taking it in? we will discuss later this hour. ♪
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emily: the tech earnings season is around the corner with netflix and due out july 16. the company is on a roll and investors have high hopes it will continue its successful performance. we are joined by our next guests to discuss. netflix have had a breakthrough year. we spoke about how at&t wants hbo to be more like netflix, but can the success of netflix and its trajectory continue? >> they are on this trajectory of growth at all costs. investors are willing to give them a break. this is the same playbook out of amazon when it was growing its business, spend, spend, spend, and gain as much market
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share as you can and profits will materialize. the concern is how much they will have to keep spending to keep up this trajectory. as long there is subscriber growth, it will continue to push shares up. the stock has doubled this year, the best performer in the s&p 500 and all nasdaq measures, and is the leaders among the tech leadership. as long as they can show they can sustain subscriber growth numbers, i don't see anything knocking it down in the short term. emily: do you? amazon has tried with this prime video thing. as a prime member, i am constantly reminded they have videos. they are trying to push this to subscribers, but can they grow the business? there has been a lot of turmoil in leadership. can amazon gift netflix a run for its money?
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>> they're trying to get more out of content spending, attracting members, spending on prime, so we think they can coexist. at some point, amazon could outspend netflix. so maybe longer-term, it for now i think they can coexist. emily: talk to us about the broader tech view. we have earnings coming up. tech was on a roll, then a time of volatility. what will you be watching for to set some benchmarks as to how the rest of the year will play out? >> one thing a lot of folks have mentioned is that the technology, large-cap technology, have become a safe haven play for a lot of investors looking to buffer
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themselves from the political, geopolitical, trade headwinds. they are looking to companies like amazon, like apple, as well as tesla, facebook, and others saying these companies are big enough to withstand these issues. they are still growing. they are in a solid phase where they can produce cash and profits as well. as long as they do that, more investors will flock to hat. it is a crowded trade. positions among hedge funds and other investors, this is the place they are looking for safety right now. unless you get significant negative or pessimistic outlooks from these companies, i don't think this will change. emily: apple has been the one
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we have always talked about getting to anyone trillion dollar market cap first. >> if you just look at earnings coming up, mobile ad demand is very strong. 20% plus growth in the industry. google, facebook will continue to benefit from that tailwind from the industry, and amazon, you see surprises from the advertising department, which is becoming a more significant profit driver going forward. one thing that investors will watch for closely is the impact of gdp and compliance costs, and all the steps the ecosystem has taken to improve privacy and data issues. that could eat into the profit side or pressure that, but the revenue growth should be ine. emily: you have folks like blackrock saying tech is not as
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overvalued as it looks. what is the consensus? >> there are two camps. some folks look at the p/e ratios. netflix has a p/e ratio of 250. amazon is to 70. blackrock pointed out these companies, if you look at them in the right way, aren't as overvalued as you might think. we have a chart that illustrates this point. the p/e ratios and how they relate to the p/e ratio for the s&p 500 as a whole, and what you're looking at on the screen is the gap between the p/e ratios for the s&p 500 tech stocks versus the s&p 500 as a whole. it is showing you it is well below historical averages, where we were during the tail end of the tech bubble. basically his argument is that these stocks are not as overvalued and he thinks they are still a buy because the growth story is stronger than hat you're seeing from the
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non-tech side of this market. emily: i have to ask about facebook. last quarter, not much of a dent from the controversy and data scandals. where we see that this quarter? >> it is difficult. you will see instagram growing rapidly. if you subtract instagram from core revenues, it might be slowing, but instagram is carrying the ball forward for facebook. because the end market demand is strong, i think the revenue ill be fine. the cost side didn't surprise last quarter, but we will still look at it in terms of regulations, is that changing the trajectory at all? i don't think facebook will surprise on the downside. emily: for core facebook services, will we see a dent in earnings and user engagement?
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>> the time spent, engagement, revenue growth is slowing, but on an absolute basis is still strong. because of that, i don't think you would see that didn't yet. longer-term, the plan is to bank on instagram while holding the fort with facebook. emily: all right, thank you both. we will be watching. coming up, groupon could be waving the white flag as an independent company. which tech giant might purchase the voucher vendor? we will discuss next. this is bloomberg. ♪
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emily: after 10 years of running as an independent company, groupon could be looking for a buyer. reports say it has approached several public companies to drum up interest in a sale. investors have long expected and acquired this would been, apple, facebook, and amazon as potential buyers. joining us now is our guest.
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i believe you are the biggest groupon bull out there. what is your take on this? >> there is a dislocation when you look at the play wishon of groupon as a public company. the north american business is in the best state it has been in its history, and they have internet operations well positioned for future rowth. with this disconnect, i am not surprised management would consider selling the business as one way to generate more shareholder value than they are getting today. emily: who could the buyers be? >> a lot of people to think about. one could be a company that owns qvc, the john malone company. another one could be alibaba. they are the own a stake in groupon.
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iac, whose ceo is on the board of groupon. so there are a lot of companies that could be circling around this company. emily: what about amazon, tom? is this something they would want? >> amazon is a special case. if you look at their historical m&a strategy, build first and buy second. sometime ago they had amazon daily deals, and they still have daily deals, but it is more about getting merchandise at a discount, so i don't know for amazon there is a lot of incremental value to the extent that i don't know amazon wants to do more in the local merchant arena. to me, the companies that make the most since are a google or facebook, companies that would leverage those relationships with local merchants of groupon, then overlay or so incrementally more advertising
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to them, so i don't see amazon as the suitor for groupon. emily: it is interesting to think about the history of groupon, a company that google almost bought for $6 billion. now the market cap is $2.6 billion. it was thought it could be a $25 billion company. >> their ceo now came out of amazon. it is interesting to think about the relationship between those two companies. he has put in place a lot of changes that make people interested now. for example, groupon plus allows customers to link their credit cards to the groupon accounts. they have a better app. the customers they have now are a lot stickier, visit more often, but that has not translated get into revenue growth for the company. mily: how important is it if the sale happens to maintain that local feel? >> that is the strength of the whole company. it is what makes them an
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attractive target. emily: tom, what do you think will happen? >> ultimately they will sell the business to an acquirer, one who would be able to leverage this merchant relationships. i really feel like they are doing a lot to strengthen the value of the groupon platform. if you think about what they're doing with full price sales coming you can buy major league baseball tickets at a discount and full price, then you mentioned groupon plus earlier. that makes this service easier to use. so when you think about the stronger, healthier groupon today, if the market does not value it properly, i think for one of these businesses it is a great opportunity to add groupon. emily: all right, tom forte long with sarah mcbride. if you are planning to be in the sun, you will need spf. it is no different for nasa's new probe that is getting the best solar protection possible.
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he parker solar probe has been given an ultraheat shield to keep it from burning up as it attempts to get closer to the sun than any other vehicle before it. temperatures on the shield will reach 2500 degrees fahrenheit as parker approaches 4 million miles from the sun's fiery service. the shield will keep the probe cool at 85 degrees. nasa engineers install the shield ahead of launch and are hoping to make new discoveries about how he from the sun affects life here on earth. that does it for this edition of "bloomberg technology." from san francisco, i am emily chang. this is bloomberg. ♪ phones have made our lives effortless.
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yousef: our top story this morning. defends hersa may brexit strategy. will she now face a leadership challenge? yousef: praising china's open market attitude. the president is sworn in for another term in turkey. promising a new era, but can he fix the economic woes? yousef: united electronics mrs. speaking to the ceo this hour.
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