♪ emily: i'm emily chang in san francisco and this is "bloomberg technology." apple's $1 trillion milestone has everyone talking. but with sector reclassification on the horizon, how big is too big? plus, the great firewall. china wants to be the world's tech leader but leading companies still want to beijing to let them then. where google and facebook stand in a brewing trade war. and peloton raises $550 million

ahead of a public offering. how does a home fitness startup fit into the broader tech ipo market. but first, apple's milestone moment hitting one chilean dollar market cap. how big is too big? it will drag tech names out of funds that have held them for years. does tech have too much: u.s. equities? amazon outspent microsoft and facebook is not far behind apple. joining me now, our guest who covers -- and on the phone, toni covers apple and tesla. we will get to your exchange with elon musk in a moment. what i want to talk about this reclassification and what it means.

walk us through how the s&p weighting will impact the tech names? guest: tech's 26% of the s&p 500 in terms of weighting. telecom is 2%. what s&p wants to do is create a broader communications category. and what that means is names like facebook and alphabet will slide out of the tech sector and into this communication center. you will have names like netflix that will also slide out of consumer discretionary and into the tech sector. there will be reshuffling to the point that the communication sector will be 10% of weighting. tech as a category name will drop to 22% or less. this is significant because so much of the trading in the market today is not just done an individual stocks. it is done with a basket of stocks. whether you are in a broader etf like xlk, the qqq or something.

once these re-weightings are done, money will have to be shifted around. that can change the trajectory for some of these stocks. emily: i have a chart showing how apple has a bigger market value than four of the s&p 500 sectors. toni, how big of an impact will this have on apple? how do you expect apple's business and market value to evil given that this is still very much an iphone company and arising services company. toni? toni: in terms of sector reclassification, there might be turbulence as those sectors get reallocated. but portfolio managers are really used to focusing on individual securities. many do tmt, telecom media and

technology together. over time, together, there will not be an impact on stocks. what does apples large-size mean going forward and how do we think about the name? trillion is a number but does reflect the fact that apple is a very big company. it is much more difficult to grow a large company than it is a smaller company. apple's highest growth days are behind it. the challenge is, can you continue to develop products and services that can push through what is a great brand name and loyal install base? the question i hear when i debate with investors is the health of the iphone. when you look at most consumer electronic products over time,

typically the price goes down and mature. we have seen that with ipod, ipad, and the mac. the question longer-term is, is the smartphone category increasingly mature? if it is a mature category and prices are going down, how much does apple have to grow the core iphone franchise? emily: there are three other stocks. amazon, alphabet, microsoft. they are not far behind. which one gets to trillion first? how fast? a venture capitalist suggested amazon would get to $3 trillion before anyone else. guest: the broader question is how much visibility in future growth there is. that is the difference between google, amazon, and face book. facebook for the near term, it

has gone down. google will disclose how profitable they are doing. you have cloud and some other bets. with amazon, profitability joining revenue growth is a catalyst. facebook -- [indiscernible] what is not clear yet is how soon can that happen? that transition period is keeping them in the back for now. emily: is there a danger for techs to have so much weight in equities? romaine: anytime you have a stock like apple that is 80% of the nasdaq, you risk associated with the broader market with that particular stock. most people will look at the performance over the last few years and they that tech has

done the market pretty well. when you look at the s&p 500 technology index, it has a total return -- that is almost twice what you've gotten out of consumer discretionary. most investors will be happy for that. when you have stocks with this type of weighting, if there is a huge shift in sentiment, that will drag the whole market down with it. we talk about the s&p re-weighting. part of why they do that is to reflect changes in the economy and make sure the indexes are weighted in a manner that is more equitable to what the real economy looks like. emily: toni, i have to ask you about your exchange with elon musk. you were one of the analysts he caught up with on the last earnings call and apologize to you on this earnings call. elon musk: i want to apologize for being impolite on the call.

there is no excuse for that. i have reasons for it -- and 120 hour weeks, but there is no excuse. my apologies. emily: do you accept his apology? what is your level of confidence in musk's leadership and execution given the capricious behavior we have seen over the last several months? toni: certainly, apology accepted. you saw in the stock reaction on the last earnings call that investors were nervous about his dismissiveness on questions. there has been concern among investors, does elon take seriously the investment

community? if he focused on financial metrics? is he statesmanlike enough to be running a company? and you saw the negative reaction in the stock following the conference call an early may. a more straightforward earnings call, it was a positive step. they are focused on financial metrics, key investor questions. and who can lead the company with a level of statesmanship and decorum. it was a positive step. most investors that no tesla well, elon is not your typical ceo. he is highly visionary. he tweets a lot.

he is very expressive in his views and much less guarded than most ceos. they recognize that is part and parcel of what you get when you are buying tesla. in the recent months, there have been times where that aspect of his personality has been detrimental and distracted to the investment focus. seeing a step in a positive direction. i think generally, it was reasonably well regarded. emily: he is setting new targets for himself, 6000 model three's a week. he says there are no plans to raise capital. that he doesn't need to raise capital. do you agree? toni: i think it's possible they won't need to raise capital this year. they are taking a lot of steps

to try to hit that bogey. they are going to squeeze working capital. they have done a headcount reduction. they are pushing very hard for that. it is possible they will not need to raise capital. on a go forward basis, i think they will. this is a company that is going to grow. think about the initiatives that have been planned, a factory in china, europe, launching the semi, rolling out the solar business. they have $3 billion of debt coming due in the next couple of years and that is probably $10 billion plus worth of capital. i don't think the company is going to be cash generative enough. they can get by through some austerity measures in the second half of this year. you want them to be able to seize market opportunities if

they are there. emily: thank you so much for joining us on the phone as well as romaine in new york and jitendra here in san francisco. coming up, some of the world's largest companies are collaborating using a face book platform called "marketplace." we will talk to the lead on acquisition and expansion next. this is bloomberg. ♪

emily: back in 2016, facebook created a collaborative platform called "workplace" to chat with

colleagues and offer social network features in a more corporate environment. it has grown extensively using the platform. but there is competition from the likes of microsoft. for more, we talked to caroline hyde. caroline: our guest is really running it right here from london. we were hearing about competitors like microsoft and flak. are they competitors? guest: i don't think they are competitors. flak. are they competitors? we can be in any company and any industry. people have never had a desk, email, or pc. basically, 4.5 billion people are employed and working with that device. i don't see anyone -- [indiscernible]

caroline: and how does that empower the barista at starbuck's from a sales point? julien: it gives them a voice for the first time. they understand who it works for. they control the company. they can be identified. they can exchange with colleagues from other stores. when you give everyone a voice like that, you change how the company is run and it gives opportunity to people who did not necessarily have opportunities before. caroline: you are interested in the acquisition trail. email, the enterprise side of conductivity. julien: it is a great company, a grade ip. a company that has been in business for a long time. the ceo used to be the vp of products at jive. caroline: what does it say about

the purpose of where they want to go? how significant you can be for the parent company. julien: it can help us. to move away from things like mailing lists and newsletters that people don't really like to use. we can use that to accelerate transition and accelerate the production of workplace when we launch in a company. caroline: you have 30,000 companies already. how global is that spread? how can you make connections to get inside these businesses? julien: we are in paris and brazil, we have to be present where our customers are. and we can use the facebook infrastructure. we want to make sure that we are the best -- [indiscernible] caroline: you have a subscription model that's not in the rest of face book. what about nonprofits?

julien: workplace for good is free. we also have the premium, but the free product -- it is a new business for facebook. and we want people to know very clearly that it is a very different product. it is a very different business model. we need to find a way to create ground within facebook, inc. the first startup was in facebook. caroline: your part of facebook. the company can be a driver of growth and a hindrance about privacy and data. what about the businesses you are talking to in making sure they are completely at ease with the product? julien: we have observed google cloud or amazon, how the company

created a very successful side business. we are going to the same journey. we have to create our own brand and go through the possible security and privacy -- [indiscernible] banks, financial institutions, governments. it is a new force we are building. at the end of the day, it is one of the few companies in the world building its own infrastructure. so we have a lot of credibility as a tech company and we have to build credibility ready to serve companies in the world. caroline: i wish i could talk to you for longer. come back. emily? emily: caroline hyde for us and london. thank you so much for that interview. coming up, the great firewall of china.

facebook and google want in, but at what cost? this is bloomberg. ♪

♪ emily: another salvo has been fired in a trade war between china and the united states. beijing unveiled a list of $68 billion worth of u.s. goods to be hit with tariffs. china says it will happen if washington follows through on its plan to impose duties as early as next month on chinese goods. larry kudlow said the white house will not back down. larry: we said many times, no tariffs, no tariff barriers, no subsidies. china is not delivering. their economy is weak and their currency is weak. people leaving the country. emily: isaac stone fish, do you

see any end in sight here? isaac: this will be a story for quite some time for the u.s. side and the chinese side. at least very publicly, they are not showing desire to back down. on beijing's side, we are gearing up for a secret annual meeting for chinese leaders in a resort town that will happen sometime in august. after the party leaders meet to discuss some secret agenda that we know very little about, we might he more movement on the beijing side. it is unlikely we will see anything until perhaps right after the midterms. emily: in the meantime, you still have u.s. companies dying to get into china. you have an op-ed out about facebook and you recommend

facebook completely shut down ambitions to enter china. mark zuckerberg has said it can't be a company that connects the world of china isn't part of it that facebook has been blocked in china for many years now. isaac: in the op-ed i did for the washington post, i recommend facebook give up on china because the cost of entering the chinese market very much outweighs the benefits. the reputational cost, facebook would have to share data with the chinese government. and the practicalities of doing so. they would have to hire an army of sensors and compete in a very competitive social media landscape. it's hard to enter the chinese market without being a chinese company. it is that for facebook, consumers, and the world. emily: google has been secretly working on an app used in china that would censor results. many employees are not happy about this.

eight years ago said we are leaving the country because you are making us since her our results. and now this. what do you make of it? isaac: it is probably to google's executive chagrin that this story leaked. i think it is quite troubling that the company that has done more in the tech world to stand up for free speech and anti-censorship values is now bowing to china to serve a market of 1.4 billion people. it is hard to see this as anything but capitulation. it is possible google will decide not to go forward with this. it is possible for chinese consumers that will get a better product and a less censored product like baidu. it's hard to see it as anything other than bad.

emily: in the trade war, is beijing likely to give any concessions to google at all given the broader atmosphere right now? isaac: it would be a p.r. win. it normalizes china's political system if they have a company like google that is seen still as a representative of free speech. if it goes to china and acts like an international company would anywhere else in the world, there would be a lot of pr upside for china. they can do it without fearing google was spreading sensitive information. emily: isaac stone fish of the asia society, a great op-ed in the washington post. thank you for joining us. peloton raised money in its latest round, will it be the next tech company to hit the public market?

and will it here better than this week's disappointing debut from sonos. we will discuss. this is bloomberg. ♪

♪ emily: this is "bloomberg technology." we are halfway through the year with a number of tech companies making their ipo debut. this week we saw sonos begin trading on the nasdaq. shares below the marketed range trading about $1.5 billion valuation, half of what it hoped for. peloton meantime has just raised $550 million before a planned ipo. so, how will the rest of this play out? we have our ipo reporter and olivia -- who wrote a story on peloton. we want to start with the broader market.

how does this year compare to last year? >> folks are super excited about how this year compares. there have been 33 technology companies which includes internet companies, they have raised $11.5 billion through july. last year and all of 2017 we had 40 companies raise $13 billion. we have almost jumped over 2017 when it comes to new listings in the u.s. and deals like dropbox are pushing that number up. spotify does not even come because you remember that was a direct listing. it's been a bigger year. the markets continue to be conducive for initial public offerings. and investors do seem to be paying out for most companies. sonos may be the exception. emily: peloton is planning to go public.

why did they need all this cash? >> the point alex brings up may be why peloton says this may be its last funding round. at a $4 billion valuation which is huge for this company that makes home fitness equipment. i think they feel they're profitable. they are going to lose quite a bit of money at the end of this year delivering their new treadmill. i think they feel they really need the cash. they need to grow. they are opening in england and canada. emily: how many years out is this? >> this could be big time next year which is when they are targeting. emily: what market are they going into? >> when i talked to the buy side, that is the big question. there is an increased level of uncertainty injected around the political space, around the discussions with china. it is prudent for companies if they are looking to go out about a year from now to have a bit of a war chest. to have cash, so they can continue operating. when i look at peloton, if i were an investor, i would need

more proof points. you have it bike, now you have the treadmill. is the treadmill going to be as profitable as the bike? they will need to be able to sidestep some of those questions and be able to show the proof points. emily: meantime, you also cover airbnb, which hasn't given any signals at all about their ipo. >> they came out, the ceo recently came out and said they are going to go no later than 2020. he made that very clear to his employees because the stock will start to expire around them. he has said we are not going to wait much longer. we will be ready to go around this time next year, the back half of 2019. a lot to work to do, they need to hire a cfo, they need some independent directors on their board and there is a town of regulatory uncertainty for them. new york came down in them. they're planning to cut their listings and half in new york city which has cut their new york city revenue in half. a lot of uncertainty and i think they need to deal with that. emily: could they face the

regulatory crackdown they are seeing in new york, to that help and elsewhere? >> we're starting to see it in japan. emily: alex, when you think about bigger ipo's like uber which dara has said by 2019, how do those big ones change the dynamic of the market? >> exactly. snap is a what example. dropbox is a good example they should. snap didn't do too great. we did not see a lot of consumer internet listings because it was un profitable and it was not able to make investors feel better about those concerns a year and a half on. drop box is the other side of the coin. they have done very well. it is also much more conservative listing. it does not have the same trading premium that some of

these consumer internet companies might have and do have in their private rounds a few are airbnb. those concerns, while private investors might be able to look past them for a chance to get in on these new companies, public investors tend to have a higher threshold when it comes to how much risk they are willing to accept as these companies go on in her public life. emily: so, where is uber. >> uber is saying it is not profitable. it had a profitable quarter earlier in the year because they sold their southeast asia business. the ceo says he does not care. he was then to have positive cash flow. they can still targeting ipo this time next year. emily: that is quite soon. if you're looking at a 2019 ipo you are thinking about what that means for the profits. uber has been a little bit more, they started basically reporting finances for a public company. that came with some of the issues they dealt with in the past year. investors want to see more out of them.

if you are looking at a 2019 or 2020 listing, then you are certainly getting your ducks in a row now and seeing how you can take that step forward. >> is this a company that is raising a 70 billion dollar valuation -- it has not gone much from there. >> if you are public market investor you're going to be taken into account but it was come down to financials. we have seen some of these companies like snap not get the private valuation they wanted. they had a big number and mine and was their financial numbers got out there they had to rein that in because they realize we are going to have to meet investors at the table and they are going to have to. agree to give us the premium that we want if it's $70 billion for uber now, that can always change. again, broader market uncertainty is something that plays in the minds of public investors are not necessarily private. there will be a lot of factors that go into those valuation

conversations and as we saw with snap, that number will fluctuate right up until that day when they price their shares. emily: thank you both. a massive wrong way bet on bitcoin has put a dent confidence. an unidentified trader made a long position order worth about $416 million. however, the exchange cannot cover the loss. not only did the trader lose money but all other futures traders who were forced to give up 18% of their profits. coming up, the game maker behind kim kardashian hollywood has had a great year but not necessarily because of its celebrity name. we'll find out what is up with glu mobile next. we'll take a look at how a shoe company is winning over the elite by going green.

check us out on bloomberg.com and sirius xm. this is bloomberg. ♪

emily: shares of glu mobile have almost doubled but the success of the passes been helped by celebrity status and some of his collaborators. so where is glu mobile looking for his next big hit? here to discuss is the ceo of glu mobile. kim kardashian hollywood was

huge for you guys. some of the other celebrity games, apps have not turned out so well, taylor swift, nicki minaj. why pivot from celebrity gains? >> kim was a huge hit. and still is. still contribute in a big way. emily: how big? >> almost $10 million is less quarter. $200 million to date. a great success. she is great to work with. we tried to follow along with some other celebrities it did not work. hard to say why. kim has something special about her, but as a company we pivoted to new types of games, still games for women, games like design home and that has been the success of late. emily: before he was away from kim, obviously her participation comes at a cost. how much do you make on the game? >> we do well. she -- this is a big revenue item for her. she deserves every penny.

the incredible brand name and participation and collaboration. a little lower margin for us. emily: shares are up 88%. what is driving that if it is not the celebrity game? >> we're very fortunate to acquire company a year ago called crowd start. inside of crowd star are a couple of games, one is covet fashion, where you take models and dress them up and the other is designed home, a similar construct. instead of dressing up a model you dress up a room and a house. those have been two of the big engines along with tap sports baseline. emily: where is the next big hit going to be? >> it is hard to know. we have a couple of things we are excited about which is a disney pixar game. not out till a year from now but we are very excited about having the whole cast of characters from the pixar universe in this game. we're looking for that to be a big hit.

emily: what is that game going to be like? >> it is a role-playing game, or collectible card game where you go in and pick a cast of characters and take them on a journey. they will do better with other groups of characters and such. emily: games in messenger apps, what are the prospects you see with facebook messenger, apple doing it and i message, how big a growth opportunity could that be? >> it is hard to say in terms of how it is going to work in western market. it has been doing very well in asia. we have not seen it take off from a monetization -- we have seen some good indicators. as a company we are not yet stepping into that but we will watch it closely and see how it grows. emily: when you look at the china and the u.s. our western market and china has got these hard-core games that dominated. in the u.s., it is a lot of social games. do you see that evolving one way or the other? >> in terms of the west, we will see growth of the social games. games that are called casual that are probably the wrong

nomenclature because a lot of these fans of more casual oriented games are big spenders and very engaged with these games and spend lots of time, lots of money. i think apps for women, as an example on the gaming from, is going to see a lot of growth. emily: how much do you think about diversity, i'm very concerned about diversity in tech in general, but also in gaming. and social games have helped, but when you have a game where you dress models and vote on them, you wonder what good that is doing for the world. >> it provides a to menace amount of pleasure for the folks who play it. 90% are women. we love doing it. we take diversity very seriously. i have two daughters. we do our best to hire a lot of female creative leaders and help us understand that market

because that is a great opportunity for us. emily: do you think about the representation of women in games? >> we do. with kim kardashian it is very female oriented. we see that with covet fashion. helping us understand the markets of being inside the games as a part of the whole -- emily: that was a big acquisition, as booking drives, as margin drives, what options are you're looking at to return cash to shareholders? >> we love m&a. we think there is a great opportunity over the next 24-36 months to be able to consolidate and buy studios and bring them in, as long as they are good structural and cultural fit. at this point is to invest in developer future games and try to create more growth games. emily: what he think is the

biggest competition? candy crush? >> it is a great question because there is no one game we compete against, no company that we compete against. it's just, as we talk about so much is the share of time. there are so much to do on the phone, whether you are being entertain or getting information, i think we compete against the minutes in a day. it's our job to really create something that is compelling enough for someone to spend time in it versus someone else, whether it is a social network or what have you. emily: thanks so much. we will watch for the next hit. huawei technology says it wants to become the world's number one smartphone maker by the end of 2019. the ceo says he wants to surpass samsung with a market share of 20% by the end of next year. huawei has expressed an intention of hitting 200 smartphone units this year. ahead, the shoe startup is revolutionizing the industry with its clean technology.

tim brown will tell us how the company is looking to use its materials to go beyond fashion. bloomberg tech is streaming online. and follow us at tic toc on twitter. this is bloomberg. ♪

♪ emily: symantec tumbled friday. the world biggest maker of cyber security software expected to record $15 million in restructuring costs as it cuts 8% of its workforce this year. it closed fewer business deals than expected. larry page, the former twitter ceo and ben horowitz have been sporting allbirds, the environmentally friendly footwear sweeping silicon valley. since launching in 2016, the startup has tiger global and leonardo dicaprio, the company

uses wool and eucalyptus tree fibers to make shoes. and is adding brazilian sugarcane. it replaces plastic foam that uses 95% less water than typical shoes it. allbirds says it is so much more than a shoe company. joining us now is tim brown. you've got these new sugar zephr flip-flops that have the sugarcane. >> it's a journey that took about three years. my co-founder had a previous relationship with him personally and green energy company. we convince them to reconnect some parts. and effectively replace the pitch with sugar in one of the most commonly used material in footwear which is foam.

emily: what is the technology behind this? >> effectively something that has been around for decades. we convince this company this is the right thing to do. traditionally the fashion industry has a low-cost mentality. going always to the cheapest material and we think this one is better for the environment and we convince them to change the way they do things. emily: and you say it's a carpet negative footprint. pun intended. >> in raw form it is. we came into the fashion industry -- into a footwear category that has been paying lip service to the idea of sustainability. emily: one of the reasons this is a big moment is you are open for seeing this technology. >> we are a small company. the problem is big. outside the fossil fuel industry, the fashion industry is the largest contributor to carbon emissions. we cannot do this alone. we bought this material to the

market is and we will make it widely available to the rest of the industry and other industries to use. emily: is there any difference in the strength of the sole? aside from the environmental impacts. what is the difference? >> it's the same thing. i think that is really the unlock for sustainability. we can solve these problems. we can put a man on the moon could we should be able to make a t-shirt and apparent shoes sustainably. the fashion industry has a problem and there's a new family of businesses that are trying to solve this problem. emily: what about the cost for the consumer? >> we have a direct consumer business model. we don't, we are not reliant on wholesale. we release these products when they are ready and we have the margin -- that's better for the environment. emily: nike introduced new sneakers recently. what about the competition? >> it is fantastic.

we believe that allbirds this is the problem of our generation, we have to find better ways to make stuff and this is something that hopefully we are a small part of a larger movement. we certainly, it was the biggest day in the history of allbirds the other day when we released this big material innovation that it will be more to come. it's really important. emily: can this be used beyond shoes? >> there are applications and automotive and solar industries. the more the merrier. emily: these fibers, castor oil, wool, what other material so you are experimenting with? >> lots of them. people do not buy sustainability. they buy great products. we are anchored in the idea of comfortable shoes. so, everything starts there. we believe if you make it a nonnegotiable, sustainable materials can be found. they can be used. and what you do, the cost come

down. emily: there are other shoes, that are comfortable. i'm curious, what you think it is that has caught the eye of the tech community? >> i think there's a big shift going on in the way that we work and the way we play. sometimes called ath-leisure. it is something fundamental. we have seen it come, the footwear industry didn't quite catch this. footwear tends to be very colorful and we were able to have a design profile that was very simple. we launched with one shoe. emily: are you making money at? >> we have been profitable from the beginning. we haven't released any numbers. but inside our second birthday, we announce we sold one million pairs of shoes. we have the foundation of a big opportunity but a long way to go. emily: how big do you think allbirds can be?

you say it will be more than a shoe company. >> we are about sustainable material innovation, we are focused on the footwear market. it is an enormous one -- 23 billion pairs of shoes a year. beyond that, the vision what we are doing is larger. emily: did you send larry page a pair of flip flops? >> he can jump online and hopefully he can buy a pair. emily: allbirds co-founder tim brown, thank you so much for joining us. that does it for this edition of "bloomberg technology." thank you so much for watching. happy friday. we will see you back here next week. ♪

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