♪ emily: walgreens and microsoft team up, we will hear how the drug stories using tech to stay head of consumer needs. plus, our exclusive interview with oracle's ceo. why he is bullish on spending on m&a. and price hike appeared netflix raising prices for u.s.

subscribers, the biggest hike in 12 years. will users stick around? but first, to our top story. walgreens and microsoft have announced a new partnership allowing the drugstore retailer to use the tech giants cloud services. the company has been moving on numerous partnerships to stay head of the looming threat of amazon. we are joined by the ceo of a walgreens-boots alliance. thank you for joining us. the first part is powering digital health corners inside the store. how will that enhance the consumer experience? first thing ishe that we will offer any kind of caniances and services that help people to take better care of their health, related to

health care. butbut after, we will have of course, more importantly, and advisory service to tell people what they can use, how they can use, and helping them to set up all of these devices for them. again, werent level for provide a solution certain chronic conditions like obesity, or think of something like medical [indiscernible] how to take [indiscernible] in the right way at the right time.

care health [indiscernible] a way for people in the pharmacy to understand better what they could do to take care of themselves. emily: so walgreens is going to be using microsoft as your cloud software, moving all of your applications and data to the microsoft cloud. did you not choose amazon because both walgreens and microsoft are facing the threat of amazon in retail, and now pharma? stefano: to be honest, this is a program that we have had for a long time. that thelways said consolidation or the vertical inflation of the health care --

ion of health care is a good thing, because you could deliver better care and more affordable. but there are many ways to verticalization, not just buying companies, but having a partnership. [indiscernible] we have partnered with different players to offer different services to our customers. care, vision, dental. we have tested all of these services, and when we were satisfied, we hold them over. at the end, we have a pharmacy which will be a kind of health care hub, where the patient will be able to find what they need. emily: amazon is grabbing a

ander share of the health beauty market, and also getting into pharma. do you see amazon as a threat, and how big a threat? stefano: i don't believe it is a threat. we neededng technology to cut all of these things together. withve the agreement microsoft, that is why. that with the artificial intelligence of microsoft, we can create a system reaching out players,ent manufacturers, providers nationally and locally, to offer the system to the customer where we can take care of what the customer needs, and probably beo anticipate what could

there needs in the future. to simplify the life of the customers and also our life, because we will be a more efficient company. this is an echo system -- igo system that is independent. that isstem independent. if amazon comes to this space, ok. nobody can control all of the market. we have to do our way. we believe that our point is to put the patient at the center of everything. we have a fantastic network, a physical network, we can reach our customer every day. there are a million people coming to our pharmacies just in the u.s. emily: you have some other

partnerships to keep up with the changes in health care. you have a partnership with a division of alphabet, parent company of google, a partnership with birch box. itt is the strategy, and is increasing foot traffic yet in your stores? stefano: it is. to offer ouris, customers what they want. [indiscernible] we are offering a certain ,olution, we are testing today and we will make available to everybody tomorrow. and this is part of the ecosystem i was talking about. what is important is to offer patients what they want where they want, when they want. emily: walmart has been in a

dispute over cbs -- with cvs over cost. are you happy with the reimbursements you are getting from cvs? or are they too low? contract has its own story. of course, we check every contract and decide whether we want to deal or not. sometimes we say yes and sometimes we say no. that certain companies are pushing too much, and we say no. right, we will be watching to see how the partnership with microsoft unfolds. thank you for joining us today. up, netflix subscribers in the u.s. about to see a price hike. will they pay up? if you like bloomberg news,

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♪ emily: netflix is raising its prices for the first time in's 2017. the streaming giants at its most popular plan will increase from $11 to $13 a month for subscribers in the united states. shares rose tuesday as investors sought is as a sign of confidence that customers are willing to pay more. joining us to discuss, our analyst, who covers netflix. do you think customers are willing to pay more? all of them? mark: i'm not sure all of them

will. i think there are four pieces of evidence we see that suggest the price increase will stick. we do quarterly surveys, for almost eight years now. we see record high levels of satisfaction. howsked current customers they would respond to a price increase, it's always a leading question, but generally we have seen a pretty high tolerance for additional fee increases. third, it depends on what the competing alternatives are. you look at hulu, the price point is still 25%, the comparable stream on hulu, it is amazon. price point as there's nothing to suggest they are overpriced. the outlook for netflix is extremely strong. the average person is probably spending $.30 an hour, if you look at the average use of time, that is dramatically cheaper than going to a movie theater

with the date and spending $17. you could stay at home and order a bottle of key auntie -- chianti. we think it will stick, there are risks, but we think it will stick. emily: we have talked many times about how netflix is spending billions and billions of dollars on content. we are seeing that hailed with awards for "roma," and "bird box" got so many viewers in a week. it was the most loved brand on facebook last year. netflix have said they are going to burn through, they burned through about $3 billion in cash last year. do you think the business model is sustainable? mark: i think so. an unknown future really prove it by looking at the historical financials. i would turn the question back and say, why wouldn't netflix be able to be dramatically profitable when they choose to do so, just like hbo and other subscription -- well, not them,

but others have been? i don't think there's a structural reason netflix can do that. what they have embarked on is a strategy whereby all the extra revenue, almost all of that, they put back into content to feed the fly will -- flywheel. it has been successful, and we think they will need to hit the debt market and raise more financing. they have been able to successfully do it so far. i don't think there's a structural reason they can't do it. it's really a strategy question. are they being too aggressive on this? i don't think so. we haven't seen any major screw ups in about five years but that doesn't mean we won't have one in the next couple of years. emily: you said you expect the faang to outperform this year, you see the biggest risk to facebook and snaps. let's look at facebook. you're getting information on sentiment from users and penetration. what lead you to being so

pessimistic about facebook? mark: well, let's see. from a stock picker's perspective, and if you look at the faang stocks, the large-cap internet, the problem child, the stock most dislocated, i don't think there's any debate that it is facebook. the sentiment has turned so much on that name. it creates the opportunity for upside. we are showing not falling satisfaction but slipping satisfaction among users and advertisers. that is for core facebook. we see rising satisfaction for instagram. thee is a great hedge in business model that if they execute well on will serve them well over time. we think it is the best moneymaking idea in large-cap internet because the sediment is so negative. i think fundamentals will be more stable. snap executive leaving, but berkeley -- barclays upgrading them. mark: we have a low conviction

buy on snap. the stock did not work for us last year. we look at it and they are doing things to fix their app on android, and a are taking their ad inventory and putting it into an a different format him a that worked for twitter. investors have not seen it, the stock is been punished. fundamentals are moving up, there's no evidence. we haven't seen the evidence. if you see it, the stock could go up, but this is extremely risky, least impressive fundamental story, at least among the large-cap internet stocks. the least riskee for amazon going into earnings? i have to ask you, how concerned are you about the jeff bezos divorce tabloid coverage, given

that he could be forced to split his stake in amazon in half. he owns 60% of the company and his wife is potential -- owns 16% of the company and his wife is potentially entitled to 8%. mark: i don't know how that would affect the company. i could come up with a real nightmare scenario in which an 8% holder would do something to undermined the business. i find that hard to believe but i guess i could come up with a scenario. i think will come down to the fundamentals of the business. what we do know about amazon, this is the most consistent management team across the internet, and maybe across technology. you look at the top 20 executives in amazon, the average tenure is north of 15 years, i don't think you can find that, certainly in silicon valley, as you know. there is a grass is greener mentality of people are constantly moving.

facebook and google have seen that, but not amazon. they have an enormous amount of consistency and it should help some power through these events. near-term, we have what seems to have been a strong holiday season. amazon should have fully participated in that. estimates were reasonable. we have the small areas very intriguing to us. the growth in alexa, and the rise of the amazon stores. they are really interesting, innovative, and potentially long-term growth drivers. you want to see businesses with great near-term fundamentals with options for the long-term, amazon gives you that. emily: if anybody is competing with amazon for talent, it is microsoft. in washington, executives go back and forth. we see the new partnership with microsoft and walgreens today, and microsoft also partnering with kroger. obviously this makes microsoft cloud more competitive, but also they are expressing interest in

pharma. threat of a risk of -- a is this to amazon, as they look at grocery and pharma? mark: in terms of competition for talent, you make a great point. there is a new microsoft in town. i imagine high-tech talent, if you can take the ring, you should be considering moving from san francisco to seattle, because you have two very innovative, large, successful employers there. they are definitely competing in cloud computing. no question. amazon is the first and the leader in terms of innovation and pricing. microsoft has an outstanding presence in the enterprise. they will go at it for a while. it's a robust growth category. i think cloud computing can sustain growth rate of 30%-40% the next three years. very few industries can do that. both companies could win in this environment. where they could get into each

other's core areas, i don't think microsoft gets into the amazon areas of retail. whether microsoft -- amazon to get into microsoft's area of enterprise software, i think would be harder for amazon to make that pivot. emily: always great to have you here. coming up, breaking his silence. a reclusive tech leader speaks out. what the founder of job way -- huawei had to say to the press. that is next. this is bloomberg. ♪

♪ 's reclusivei founder may a rare media peers to defend his company against accusations of spying for china. speaking to reporters for the first time since 2015, he said, "i love my country and support

the communist party but i will not do anything to harm the world." he also praised president trump, saying he is a great resident, he dares to massively cut taxes that will benefit business, but you have to treat well the companies and countries that they are willing to invest in the u.s. in the government will be able to collect enough tax. why did he decide to speak out now, selena? an interesting turn of events. over the past few weeks, a lot of executives have spoken out, but we have yet to hear from the founder, the billionaire founder. he is finally speaking out, and it really underscores just how deep these attacks have become. the united states has long held suspicions of the company, that there might be backdoors built into their telecoms equipment connected to the chinese government. the company has long denied the allegations but the founder has really stayed out of the spotlight. he is really a very revered

figure in the chinese business community. what he said really matters. he went into greater detail than nine allegations, saying he would decline any requests from beijing for sensitive information on clients, and stressed the potential for cooperation with u.s. and trump administration. not surprisingly, he tried to play down the company's role in current tensions between washington and beijing. the global investor community would probably disagree with that. emily: his daughter facing extradition to the u.s. from canada. what is the latest on that? selina: exactly. his daughter is still facing extradition. trump did say before he would consider personally intervening on the behalf of huawei. he was asked about this, the founder of huawei, what he thought of his daughter's arrest. he did not go into detail and said he would take away and see approach to donald trump's

response. we have also seen a number of developed nations, from australia to new zealand, deciding to limit or block some of the companies telecom equipment gear, and recently, sales executives at -- a sales executive at huawei was arrested on charges of espionage. they are having to deal with increasing attacks on the company. the founder is hoping that perhaps with him coming out and speaking to the foreign press for the first time in three years, it will carry weight. emily: quickly, huawei has been providing stiff competition in smart phones two samsung and even apple, but is global sentiment showing any sign of turning for their businesses in other countries? selina: he said he expects revenue to grow at $125 billion in 2019 or more than $100 billion last year. this company generates more

revenue than alibaba and tencent combined. it overtook apple and the global smartphone market. it does have growing clout in the smartphone and telecom sphere. even though it will be banned in a limited number of tech of -- limited number of countries, there is not indications it will her business too much because it will then deep and is resolved in other markets that are open to it. for instance, parts of africa, developing europe, and asia. despite the fact that a great portion of the world isn't open to them, they will double down in markets where they are. emily: all right, selina wang continuing to track the story. coming up, feeling the heat of a government shutdown. what oracle's ceo has to say about government contracts, next. this is bloomberg. ♪ ♪

♪ is "bloomberg technology," i am emily chang in los angeles. the current u.s. government shutdown is the longest in history and it's not only impacting government workers but the business that works with them. one being oracle, that works closely with the federal government, holding some contracts with exposure to the shutdown. we caught up with oracles ceo and asked about the shutdown and the feedback oracle might be receiving from contract -- from clients. ongoing government projects that in some cases take

a pause with all of this. that certainly is an issue. optimismhere is still that something will get done here. i certainly hope so. >> on a similar topic, right now we are dealing with tension in europe, particularly with regards to brexit, as we speak. we are running headlines, just how much cover -- confidence there is in may's government. could you talk a little bit about the business impact of brexit on what you see in europe? >> i think there is even a broader topic than brexit, and this is going on across europe. you see what is going on in france, you could make an argument it is perhaps even more serious than what you see with something like brexit. in, whateverse world you want to use,

nationalism, across many countries, not just what you see perhaps in the u.s.. that has impacts on business. when you are in the technology business, privacy rules are increasing. when you look at the movement of our entire industry, to the cloud, intellectual property, software and abilities are passed up through the network, historically you could have those networks or that software located in various locations and serve it to various customers across countries. now, as privacy rules get stricter and stricter, that butires not just to have ip delivery of the ip, in many cases, local to the country. if you have a data center in the eu serving everyone, including the u.k., as of brexit, you would now need to have data centers in the u.k. and also in the eu. that is also -- that is only one issue with all of that.

but there are a broader set of issues. you probably hear the term gdpr. there are a lot of issues coming up in europe that are significant. >> to the cause you and your customers concern about, you know, the viability of the region and just demand for demand, ongoing, robust demand for your products? >> the simple answer is no. but i think there are complexities. the ability now to deliver on it becomes a bit more difficult than it was before. for example, you have certain roles where you can actually have employee data -- if you were a bank based in germany and you have employees in the u.k., you don't have the ability to mix employee data, even though

they are both employees. they have to stay in separate data sets, separate databases, even though they are both employees of the bank. same thing with financial records. you can go on and on. the segregation of information of data, in some cases local to the country, creates some amount of complexity. the complexity is actually more for the customers. more process complexity, then technical complexity. in our technology, it is easy for us to segregate views and information -- segregate and use information. but it causes complexity for the customers. make no mistake, the movement of the industry to the cloud, it is a irresistible force regardless. we leave our macroeconomic discussion, i want to talk about the global, kinds of global economic slowdown. we are seeing it in china. there are concerns about how fast the u.s. economy will grow,

and some people are talking about a 2020 recession possibly. what does that mean for you, and the lastlly, you in earnings call had a fairly upbeat view on the second half, and look like your sense was that growth would pick up, that pace would pick up. you having to revisit that, or do you remain as bullish on that forecast for a second half? >> i stand by what we said on our call. we have other factors, we have a large recruiting revenue business. a lot of what we booked in the context of an order turns to revenue later. our ability to have visibility for revenue is quite good. but back to the original question. i think the u.s. economy is doing quite well. when you look particularly at the midmarket of the u.s., the u.s. domestic companies, i think they are doing quite well. if you look, for example, our

netsuite business, that serves that midmarket, their core financials and backbone of their company, our q4, which ended in the summer, the bookings were over 70%. at 35%,tinue to trend 40% growth, really coming from the been market of the u.s.. they are a great financial bellwether for the strength of the midmarket. we see the pipeline as extremely robust, people willing to make investments in projects. robustness of the economy in the u.s., we don't see an issue with the u.s.. now, to go back to your question couple minutes ago, we have not seen much change in europe, good or bad. europe is going through a tough time. they certainly have tried to cushion their coming out of the and youn back in 2008, can make an argument that really

hasn't worked well in terms of returning to robust growth. you have the other issues we are we talked about from a macro perspective. i think it depends a little bit what you are -- bit where you are talking about on the globe. but the comments about the u.s., i don't see that in any current numbers or pipelines we have. we see a strong u.s. emily: part one of our ceo.rsation with oracle's coming up, much more from him, what he has to say about the company's efforts and internet-based computing and storage and composition with amazon. that is next. this is bloomberg. ♪

♪ emily: that to our exclusive interview with oracle's ceo. to him about the hard run tech stocks has had in -- have had in recent months and what could be done to reverse it. mark: i am probably in the into fundamentalist that if you go faster and you can turn that into earnings and turn that into cash flow, highly likely your stock will perform better than the alternative. in the end, stocks growth is important. you could make an argument i think, when you look at the fundamentals of tech, previous lun were not rational in some cases -- previous valuations were not rational in some cases. the fundamentals make sense. in our case, i think our case is we are growing -- if you look over the last eight or 12

quarters, we have been growing a total company about 3% in revenue. we really have nothing in the company growing 3%. that is how it totals, but we have these businesses, like when we have -- what we have in our applications businesses, cloud business, growing extremely fast, and we have legacy businesses we are moving out of that are declining. they aligned to the result we report. i think for us, and this will sound simplistic, but the growing business becomes a bigger part of the pie and accelerates the growth rate we talked about. as that occurs come i don't think anybody debates our ability to turn that into operating margins and cash flow. we are actually quite good at all of that. tom: you mentioned apps. i want to hear more about what is driving demand there and get a sense from you on what does oracle due to get a bigger share of that market? i have seen, $74 billion

opportunity in the software service market? talk a little bit about that story. a lot of bullish comments from you guys on the last earnings call on apps in particular. mark: the apps market, just the software part -- applications, apps is applications. it is about a $125 billion market. it has back office, which we would call erp. your financial systems, procurement, manufacturing, supply change -- chain, and hr. that is 70% of the applications markets. think of that as the $85 billion you were describing before. marketing, service, etc. would be $47 billion. a very interesting phenomenon.

traditional on premise is applications market moves into what you would call sass, it grows exponentially. now the applications market is doing all of the server work, all of the operative systems, database work. it is the data center, it is the people. the market will actually growth probably billion and triple just as it moves to sass, because is taking share from the other parts of the i.t. market. i predict it will become more like $400 billion as it goes forward. for us, we think it is an amazing opportunity. we are growing our applications market, roughly speaking, over the past 8, 12 quarters, more than double digits. the market itself is growing. when you take out the movement growing, we are the leader.

you go back to your analysts, we are leading in hr as well. attractiveery markets, very robust markets. our customers, for the reasons we described earlier, want to modernize and spend less, they want someone else doing the work and assuming the risk. we are extremely bullish about our position in the market. --have rewritten all of our larry ellison started on this even before i got to the company, rewriting our application based for the cloud for sass. we have been years at this. we have been investing a lot of capital and doing it for a while. dataur point earlier about centers, we are deploying capabilities around the globe, and we are extremely bullish, extremely excited about not just our current position, but listen, there will be a leader in this market, there is not than 50%body with more

market share. the highest application percentage of any company in any segment is mid 20's. this generation will see a leader that is much more material than that. i volunteer us to do it. tom: what does that look like? what does leadership look like in terms of market share figures, and is there a timetable you can put behind that? mark: in most segments, i would say, and frankly, most companies i have run, in most segments, the leader typically has 50%-plus. tom: do you have a timetable? mark: i don't do that. there are a couple of dimensions to it. one is we obviously have an existing user base on premises. a big user base. we believe all of them -- i was with a large group of our users last night, and they are all going to move. but they are all going to move on their own time frame. we don't actually put an end of life. we have a competitor who does that, we don't do that. we want them to move at their

pace, and want them to feel good about it, in their time frame. we haven't put a time frame on it. at ahis thing is moving pretty good speed and it will ,ot move literally -- linearly it will move geometrically. i think you will see a geometric move in the market that is significant. tom: in terms of getting there and gaining share, you talked about getting it in the past. looking ahead, do you envision a scenario where your cash pile and markable securities, i believe it is about a 9 million -- 49 billion dollars, and you think you will have to deploy that in terms of acquisitions, to get yourself further on the app side? and on the subject of m&a, where you see the gaps the most? is it in apps, and in what specific areas? or do you need to do more infrastructure in other areas? mark: it's a lot easier to say

m&a and it is to do m&a. we specifically talk about applications, applications is a bit more complex than just buying something. theof the big benefits of go forward applications market is that applications are built to work together. talksg the hr application to the financials application, which talks to the supply chain application, the marketing application talks to the sales application. it doesn't mean you take data and put it on a spreadsheet and re-inputted. technicallys applications to be built in the same workflow engine. have the same user interface. m&a, youou do typically buy a product that has a different user interface, a different workflow, which may mean that it either stands alone -- we have competitors who have done that -- but in some cases, you just have to rewrite it anyway. with the size of our

organization, which is the custom the fabulous job, in many cases it makes more sense for us to extend our portfolio through r&d. great about the current state of our portfolio, and we certainly did some m&a years back which we feel good about. it helped us and advanced is in the market. but we feel good about our position today. if you have seen some of the acquisitions we have made over the past couple of years, they have been vertical applications ete vertical industries. that's where we have been active the most. you ask about how i feel about the portfolio and how active we will be in m&a? we feel great about the portfolio, i will never say if i haveyou ask looked at this or that, the answer is usually sure. we talk about it all the time. that said, we have been very careful to make sure we don't do

something that isn't strategically aligned with where we want to take it, the overall portfolio. tom: let's talk about infrastructure as a service. to is it so challenging really kind of make headway in the market, particularly against the leader? and do recent leadership changes within oracle position you better to, you know, change tack or pursue the market more aggressively or in a different manner? mark: well, i think if you look at the -- i tend to look at the infrastructure market them of the platform market, the database market, as one integrated thing. i think for us, our database, which is the most pervasive database -- one dollar out of every two dollars spent on databases around the world is on an oracle database.

the most valuable information in the world is in an oracle database. by definition, those are very mission-critical applications. so for us, making sure we have done the work from the segregation of duties in the cloud, cloud architecture, what does that mean? i shouldn't be flippant about that. for example, when you send data into a first generation cloud, the control plane and customer data is on the same server. this could be an issue. security-wise, if someone were to get into a customer's data, you are in the control plane, and in a generation two, they are separate computers. capabilitiestabase in the cloud are now encrypted. we have introduced a thing called and a time as database. a self driving database that auto patches. you may say, why is apache even important? patch, which is

a vulnerability we have seen in the software, it may take 9, 10, 11, 12 months to get the patch deployed across our entire on premise database user base. now it can be done in seconds. we have hundreds and hundreds of fine-tuning dpa's our databases all the time. now with artificial intelligence, you can autotune, continually be tuning those databases. all of these enhancements together going to matriculate more and more of those database jobs to the cloud. i think it's really just a question of maturation, of capability, performance, security. and that's why we have been so, i think, thoughtful about trying to invest in making sure we have done this right. i believe we have. tom: talking about infrastructure, to stay on the topic, one more question. amazon has made a lot of noise

about moving off of oracle database onto their own. they do have a product. they have been making noise about it recently. tell me about whether that causes you any concern, and what would you say to a client who is thinking about maybe trying that? maybe trying amazon's database? mark: look at it. compare it. this is the easiest thing in the world to do. just test it. just try it. care whatuly really they say, and some are guards. i think the more important point is yours, which is, when you are running your most important problems, your most challenging applications, when you are worried about things like performance, you are worried about things like security, you want the ability to access information on analyze data, do you want the best database in

the world or do you want something that is not? i think you want the best. and so i would just say to anybody, just compare them side by side. i think the capability is self-evident. oracle's ceo with tom giles. the first launch of 2019, but future launches will have to take place with future staff for spacex. that's next. this is bloomberg. ♪

♪ emily: airbnb said it turned a profit for the second straight year as it prepares for an ipo. company joins several other companies expected to make a public debut this year. haveb also said expects to 500 million guest arrivals by the end of the first quarter this year.

its last valuation coming in around $31 billion. elon musk's goal of bypassing a city's traffic by tunneling beneath it is in need of some manpower. looking tocompany is fill nearly a dozen jobs from engineering to software development. they currently employ about 80 people and are in negotiations with the city of chicago for a subway like system. plus month, they opened a test tunnel in l.a. meanwhile, spacex has announced ,t is cutting 10% of its staff or nearly 600 jobs. spacex says they expect slowdowns and launches this year. that does it for this edition of "bloomberg technology." technologyeck us out @ on twitter. i am emily chang coming to you from l.a. today. this is bloomberg. ♪ this is bloomberg. ♪

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