♪ i >> i am emily chang in san francisco and this is "bloomberg technology". netflix is spending spree may not pay off as quickly as expected. breaking down disappointing fourth-quarter results. could an indictment be coming soon? u.s. authorities are investigating whether the smartphone giants huawei stole trade secrets. cook's privacy push in the middle of an iphone downturn as the apple ceo is sounding the alarm on protecting user data.

we are breaking down suggestions for congress. netflix shares slipped after fourth-quarter revenue came below wall street estimates. that is a sign that an explosion of programming has not reeled in viewers as quickly as expected. the company faces a crowded -- field in streaming with new offerings from disney and at&t's warner media. now slower than expected growth will put more of the spotlight on a price increase. here to discuss are analysts. they added a record number of subscribers and investors do not like the results given what we are seeing with revenue. what is your take? >> it is primarily the guide and not the actual. they sent some false signals, bird box numbers. believingrness into

-- old us into believing so many people were active at the end of december that they would blow away domestic subscriber addition numbers. they went to exactly what their guide was. they raised the price two dollars, coming out to $1.5 billion of higher revenue. they guided the same -$3 billion cash flow. people expect cash flow to improve and it is not going to. they expect profitability to go up and it is not. investors are more confused than anything. they are not getting what they expected. it is possible the company is coming back. >> i want to underscore that netflix burned through $3 billion in cash in 2018. they say 80 million people watched bird box. roma was shown in 900 theaters and is winning awards. the multiyear plan is to keep significantly growing content

while increasing revenue faster to expand operating margins. taking the price increase into consideration, do you think subscribers can continue to grow fast enough to justify spending? >> subscribers did grow this past quarter. that is probably their most important metric. the fact that they over delivered on subscribers showed they are still getting new people to sign onto the service. that is critical. going forward, they will face competition. that is a double whammy because not only are the services coming on board going to be competing for viewer attention, but taking some of their own content off of the netflix platform. going forward, netflix has a lot of competition ahead and the price increase in addition to mitigating the cash flow situation is aimed at the

company not having many other levers to pull in order to increase revenue. emily: you mentioned a double whammy. netflix said they think fortnight is bigger competition then hbo. all things considered, how do you see that impacting subscriber growth over the next two years? >> that comment is idiotic. i'm sorry. i am confident i know more about fortnight than he does. he is completely wrong. paul was spot on. -- rico publish something december 21 that showed top 20 programs by viewership in november on netflix, 13 were the four studios that are launching competitive services. they were 11 of the top 13. the top six programs on netflix were warner bros., disney, fox, or universal.

nbc universal. the content is going away. i do not know if it is all going away tomorrow. by the end of 2020, i bet all of the content is on their own services. the double sword is netflix will have less they can buy which places pressure to develop originals. i have to be honest. their originals suck. you might like them. they have great programs that they call original but they do not own them. ozark is great. they were bragging about bodyguard. it was phenomenal but it is bbc. they do not own ozark. until they can create their own stuff -- stranger things is original -- until they have a dozen of those, they will never replace what they are losing. emily: that is a good point that netflix owns a small percentage

of the content we think of as original because you can only get it on netflix. most of the growth is coming from international. how much does the competition matter? they are opening up all of these new fronts and other countries. >> it matters because the u.s. is the biggest market. backing up on ownership versus exclusive licensing, what matters to subscribers is where they can get the piece of content. the ownership is a technicality. if netflix has exclusive rights for years and they are drawing new subscribers, that is the magic that matters. -- the metric that matters. to your question about international, that is where growth has been focused. a couple of years ago, netflix crossed the line of having more subscribers outside the u.s.

more recently, they crossed the same line with revenue. that is where growth opportunities are. they are closer to hitting the ceiling of what they are capable of in the u.s. than in other populated regions. emily: we will continue to follow the reaction to netflix results as they come in. paul verna and michael proctor, great to have you both on the show. coming up, huawei probes. the u.s. department of justice turning up the heat on chinese smartphone makers. could federal charges becoming? -- be coming? if you like bloomberg news, check us out on the radio and on sirius xm. this is bloomberg.

emily: u.s. stocks rose thursday after the wall street journal reported, the u.s. is considering rolling back tariffs on china. they say the idea is coming from steven mnuchin. he denied the report saying neither he nor the trade representation said that. -- representation made any recommendations. markets had a volatile reaction to this back and forth. where are we? >> quite a roller coaster ride going into the close in the last hour of trading. it is the same place we were before the original headlines hit. when the first headlines hit saying mnuchin had suggested

rolling back tariffs because the trump administration is sensitive to financial markets and the moves we have seen last month, we saw markets despite. -- saw markets spike. we saw a boost when we got the rollback. we rolled over. markets led higher. the nasdaq and a dell are still -- and the dow are still in the green. where this puts us with trade between u.s. and china, it puts us back where we were before, sadly. emily: what is next? we are expecting higher-level talks in davos. >> we are. with the vice premier of china. those come later this month. investors should be looking out for headlines. i am sure as of the talks go on, we will hear headlines. many people will be attuned to whether these actually give us material gains in the right

direction or if it is kicking the can down the road. the narrative has been talks between the u.s. and china have been going well and we are moving forward. president trump has said he would like to get something done because of the way markets have been reacting. we do not have anything material yet. we are in a waiting time. we need headlines to show the u.s. and the china are willing to make concessions, there are things they agree on. emily: keeping us posted. thank you, sarah, for the update. sticking with u.s.-china tensions, federal authorities are investigating huawei for stealing trade secrets. the probe is tied to a 2017 civil suit where a federal jury found huawei liable for stealing t-mobile's robotic technology. the investigation marks a move by the government against the world's second-largest smartphone maker.

huawei is facing scrutiny from six different governments. this includes the u.s., canada, and poland. the doj investigation is at an advanced stage and an indictment could come soon. spokespersons for the doj, t-mobile, huawei, all the client -- all declined to comment. joining me in the studio is the lead of the firm china team. lots to discuss. what is your take on this increasingly aggressive stance from the u.s. toward huawei? >> this is a long time coming. this is not new. it is getting rolled up in the news that the u.s. and china are coming to a resolution on a trade dispute. this is muddying the waters. first, the cfo's detention and canada and a possible -- in canada and a possible extradition to the u.s.. emily: is she under house

arrest? >> still in canada and potentially facing extradition. this week, legislation is being introduced that would ban that u.s. companies from selling to huawei or zte and of the prospect of this criminal investigation against huawei. emily: even william barr said in a hearing that he is skeptical about zte. what are the implications of an indictment? >> his predecessors set up a china initiative to enhance investigations against chinese entities who are potentially unduly influencing american entities or engaged in illegal behavior. huawei is at the center of that latter part. this is consistent with what we are hearing within the trump administration, we want to get tough against entities undermining the u.s. huawei has had a target on its

back for a long time. emily: how could this impact trade talks? >> it was interesting in december to watch the canadians take the blame from the chinese in the arrest or detention of huawei's cfo. it seems the chinese were trying

and eliminate some of these unfair trading practices that the chinese have been guilty of perpetrating. however, we do not want the remedy to hurt business. tariffs are not the answer. decoupling the economies are not the answer. business wants to find a way forward and continue to grow. >> there is confusion in the understanding of some of the top officials about what they want with the journal reporting that steven mnuchin is in favor of giving china a deal. the treasury department has denied that. how do you think this plays out? >> it is typical among the players leaving negotiations -- leading negotiations with china to have different views of what leverage we can deploy. secretary mnuchin is saying, if we make a goodwill gesture, then the chinese will start to address the structural issues that they have been slow to talk about with the u.s. others believe giving anything midway during the negotiation

will decrease our leverage. this is the kind of discussion i am sure is happening of how do we get the chinese to move on the structural issues, not just buying more imports, but dealing with the subsidies, ip abuse, technology transfer issues that have to be addressed in order for president trump to make good on what he wants, a comprehensive deal on trade with china. emily: we will continue to watch these talks play out. thank you for stopping by. good to have you. bitcoin celebrated its 10th anniversary as the world's most famous cryptocurrency. academics are betting on a new virtual currency. we will discuss next. this is bloomberg.

emily: 10 years ago, bitcoin was the original cryptocurrency. academics think they can do better. professors from seven u.s. colleges including m.i.t. and stanford teamed up to create a unit e, a currency expected to process 10,000 transactions a second compared to bitcoins 3-7. joining us to discuss is the co-ceo of pantera capital. thank you for being here. what makes you think this can best bitcoin? >> bitcoin has become a version of digital gold. originally, people intended it to be used for making purchases and interacting with people in a decentralized way, placing a bet or trade. bitcoin is slow. these professors are working on making it faster. visa processes 1700

transactions a second. you say this can process 10,000. how? >> the problem is every computer running in the network has to process every transaction like if you have a calculator and you did to times two, every other calculator did that. these guys are working on separating that making it so that you can do multiple calculations in parallel instead of doing them sequentially. emily: your bet is that this new currency could go mainstream. why? >> it will be a long road. it is difficult. some of the areas of where this -- areas where this can be useful are things like smart contracts and decentralized obligations, things were bitcoin -- where bitcoin cannot be used because it is slow. besting bitcoin may not be such a feat right now. it has not been performing well.

what is your outlook for the broader market sentiment around cryptocurrency going forward? >> we have seen a route past 12 -- a rough past 12 months. it has always been like that. we have had runoffs and collapses and cryptocurrency. -- in cryptocurrency. it is faster than you see in regular markets. i am optimistic about this overall. we have seen a draw for the past 12 months. going forward, we will see people focusing on building technology and acquiring users. emily: is it the scale issue a life-and-death issue for crypto? >> i do. my biggest concern is if we do not solve the issue within the next two years, the tech will look like 3-d printing. a cool idea but not use that -- not used that much. emily: what are the prospects for solving the issue? >> they are relatively high.

if you look at the challenges the internet had the face, it was more difficult. people had to lay copper while. -- copper wire. here they have to solve problems that are hard but can be solved the software. at this point, there are dozens of proposals for how to do this. the next step is incrementing them. emily: the crypto market lost 80% of its value last year. what happens this year? >> we will see choppy waters and slowly grind up. emily: co-ceo of pantera capital. thank you for sharing your predictions with us. coming up, netflix slower than expected growth. putting a spotlight on the price increase. we will bring the latest from the company's fourth-quarter report. glassdoor has employee reviews for over 83,000 companies. we will look at how the reviews are standing for big tech. this is bloomberg. ♪

emily: this is bloomberg australia to get your latest. >> i am heidi in new york. >> taking a look at the top global tech stories of the day. watchmaker went down after they agreed to sell their smart watch intellectual property to google for $40 million as part of the deal, a portion of the r&d team will join google. upgle aims to ramp competition to take on the apple watch. google, margrethe vestager is said to announce a penalty targeting advertising service.

the company has racked up seven point billion dollars in fines and faces a potential threat of more if it does not obey orders to change behavior. netflix out with underwhelming first quarter earnings. postingsed estimates $4.1 billion compared to 4.2 expected. growth shows to be slowing, most growth is coming from members. they believe international markets will account for 90% of the customer base. those are the top global tech stories. emily: thank you so much. results, i netflix want to talk about the subscriber growth. records of type of growth, 80 million people watched bird box. awards for roma. revenue is not keeping pace. being it netflix's brand

received in the asian markets? international growth is where netflix says most of the future growth will come from. >> it is ubiquitous. you have more regional competitors. tencent and some of the others. apps and thes of choices within markets like china that are domestic. it is interesting, you wonder if expectations were too high so we see the decline. thatam thinking of paying and more for netflix after they announced they are raising their subscriptions 1-2 dollars a month. there is a lot of competition. i was in hollywood at the

golden globes and i can say from the entertainment industry, there is a lot of fear and all of netflix given the volume of content they are producing, the amount of money they are spending. what is interesting is if you look at growth in the asian markets, there are not betting on china. difficult for a u.s. media company to succeed there. they are putting a lot of chips --india where they saying they are planning to add a 100 million subscribers. competition from the indian entertainment industry is fierce. >> they need to create in-house bali would stuff. it is interesting. it makes sense they talk about the growth they expect to see. outside of china, markets like india, from a demographic point of view is huge, but also places like indonesia or across

southeast asia. building social media and mobile penetration is large. -- mobile concentration is large. -- the concentration should be in mobile. in india, more people own mobile phones than pc's. i want to bring in lucas shaw who covers netflix for us. what are your high-level reads on these results? record subscribers revenue not keeping pace and burning through $3 billion in 2018? >> the challenge of relying on they havearkets, their biggest quarter ever, the biggest you're ever in terms of subscribers that missed on revenue likely because of the foreign-exchange matters. they said most of the money they are collecting is not dollars.

their revenue is up subject to the currency markets around the world. butcash burn is a concern no more of a concern this quarter than in previous quarters. especially because they said their cash burn will be the same in 2019 that will ease and 2020. they have been consistent. another takeaway was they started to talk about how many people for watching shows. the metrics are vague. we have to trust the company. they talked about viewership figures for a couple different areas. and you, a spanish oh something they licensed from lifetime tv. ishow much of a problem keeping the leads they had, given there are other content providers trying to catch up? >> they have been steadfast that they are not worried. they said they are more worried about fortnight than hbo.

every time i have spoken with the ceo, he has made the point that they do not believe netflix is going to replace all television viewership or film viewership. they want a large share. new services from disney and comcast and apple and whatever thatr media is planning, is competition. it is a very competitive market. netflix is spending more on programming for the internet and the service. you have been spending time in hong kong. how are netflix prospects shaping up in asia? they are making a bet on india. >> they have given up getting into china with at the very tech giants up with their services. netflix is focused on india,

korea, japan. they had a big presentation for journalists in the region in november where they announced 17 different series. they are using a strategy in some countries similar to what they have done in the u.s. where they license take shows from top providers in the country and team those around the world. there is a popular show in korea called memories which is one of the most-watched shows and the country that they have. if you are a fan of korean dramas, that is something netflix can provide. if they do not break out country by country or growth, it is hard to project but they are doing and korea or singapore, you tend to guess on their optimism by their spending. they are investing more in original programming at a faster rate. context to theve rise? \ >> the price rise is

inevitable. they have indicated they have intent to continue to raise prices because they believe as they spend more, they need to charge more. >> thank you. stick around for more on bloomberg television. up next, this is bloomberg.

emily: we have been following the continued follow-up from the global smartphone slowdown. semi conductors, at the iphone, gave a revenue outlook below market expectations. analysts expect optimism about the company going forward. here to discuss is a bloomberg tech editor alistair barr. one of the biggest to companies in the world -- what is the

significance of this? >> it is the story we have been getting used to, the smartphone is the best technology market that existed and is slowing down. the adjustment to that is going to be longer and more painful than people think. we know what they are going to do for the holiday quarter. how much do this supply to us chinese smartphone companies? >> huawei design their own chips. huawei is a big customer, too. emily: it is not just because of apple. >> no. that is a big one. often, huawei chips, the ones they design, go in wally phones -- huawei phones. they: how closely tied are

supplier fortunes to apple versus the smartphone market in general? >> it is the smartphone market in general. apple really pioneered what they do so well. instead of buying a chip from it and tsee designed manufactures it. that has been a huge boom type of thing. when apple slows, they will suffer, as well. emily: we have heard negative news into the apple revenue story. are we going to hear more? >> the tsmc forecast implies apple is not seeing much of a pickup over the next three months. it is traditionally a slow quarter for apple, right after the holidays. expectations are low. tsmcan see that with shares. they are down 2%. emily: i want to talk about

other apple news. tim cook is making a call to protect consumers saying for time magazine quotes consumers should not have to tolerate another year of companies dataponsibly amassing breaches that seem out of control and at the vanishing ability to control our own digital lives. talk more about how he sees that going down. our reporterng in who covers tech influence in washington. tim cook has criticized the business models of companies like facebook and google, not always mentioning the names. increasing both sides of the aisle about how the companies do still -- do business. how is his op-ed perceived? one of the interesting things he was talking about was going after the data brokers that allow companies like facebook and google and other consumer

companies to build consumer profiles. he wanted to put a registry at the federal trade commission about that. a lot of folks that i was interesting. there has been a conversation at a think tank level that has been talking about what do we do about the third and fourth parties that have data and looking beyond facebook and google. it was welcome. whether or not it makes it to legislation, that is a question. looking at the third and fourth parties and the fcc, they are in the mainstream. emily: he has gone to congress to pass comprehensive legislation and it wants the fcc to establish a data broker clearinghouse that requires third and fourth parties to register so customers can track transactions. if you buy something online from an online retailer, the retailer may sell your data to a third party who makes money on trafficking the data elsewhere.

fcc andly is it the congress would take this on? >> it is entirely possible. my understanding is around a federal privacy bill is -- the focus is on how to empower the fcc, not whether they are going to. going through the process, you look at what legislators go at all of thelook things that could take away giving power on one particular topic but not another. having someone like tim cook injects this into the conversation elevates it. that does not mean they necessarily take it on but it means staff will be coming with a binder saying, does this make sense. i think it is something they have to talk about. emily: it is interesting to hear tim cook up the calls for privacy and at the same time we are going through an iphone slowdown.

facebook, google, they are under pressure. saying that apple still accepts billions of dollars from google to have their apps on the iphone. >> [laughter] that's right. emily: isn't that have the critical? -- hypocritical? >> they are sharing a lot of the profits for that. slightly hypocritical. apple, on the upside, with data collection, is better than android. , lot of the apps on an iphone they track your location and collector data. part of the point on data brokers, it depends whether facebook or google would be included in one of these clearinghouses. if they are not, this type of legislation would help google. >> senator marco rubio has introduced privacy legislation.

all of these egg tech companies send a lot of money -- spent a lot of money on lobbyist on capitol hill. his message are the lawmakers hearing? is google really speaking to them? are the messages from apple having an impact? >> google and facebook are speaking to them, going to their offices and making their pages. -- their pitch. everything that started with cambridge analytic a has pushed legislators to want to act. the bill you guys passed in has made industry want to come to congress and get a federal standard to preempt some of the state laws. they are hearing facebook and google because they want to move amething forward to create federal standard and would make it so california, when it comes

into effect, might not have what facebook and google are most worried about. emily: tim cook mentions it is not too late to do this. finding something that republicans and democrats agree on has proved elusive. [laughter] how far out could some sort of agreement or legislation actually be? looking at legislation in march or april. a littles think it is bit further out. . you have to go to congress. it can take a while. if you are committed to doing something, you have to do it in the first year of the congress. you will get into it i presidential election year, that will take up a lot of the oxygen

in washington. you have to move quickly. emily: we can think of a few issues sucking up the issue -- sucking up the air in washington. [laughter] thank you both. ahead, glass door is expanding its global operations. where they are launching the newest site next. this is bloomberg.

emily: glass door is betting big on global expansion. they have announced its entry into singapore, hong kong, and new zealand, bringing localized sites to 18. the expansion comes after they ditched plans to go public. they were acquired by the japanese hr company recruit. i sat down with the ceo robert hohmann. >> we have had a million people a month in singapore.

there is a thirst for transparency in the labor market. they have a customized glassdoor experience and app. emily: why? >> it is a global concept, the idea that when you make a decision of where to work, understanding what it is like to work there, understanding what fair pay is. we knew that when we launched. we have been slowly want -- fully launching your after year. anly: you have had interesting year. you are planning to go public and changed course, sold to a japanese hr company for over $1 billion. why did you make that decision? >> it was one of the hardest decisions. we were barreling down the path of going public. acquisition, we have been talking for years. at the end of the day, it was about mission.

we wake up trying to figure out how to help people find a job they love. we could do better as part of recruit. they are the words -- world's largest recruiting company. our sisters -- our sister company is the world's largest job board. having access to the shared data that companies can bring to bear on helping people find jobs, we felt we could do better as part of them. emily: do you think it is the right call and let -- in light of market volatility? >> we are building for long-term. we knew there would be volatility. we knew it could be a challenging time especially for recruiting company. it played into my thought process. the bigger issue was if you think about our mission, we be better off being independent are part of a recruiting company, we decided the latter. >> over and lift have filed to go public. airbnb is considering a direct

listing. there is no one-size-fits-all. for me, i thought about mission, what is best for our employees. in our case, we wanted to operate independently. what was best for our customers and job seekers. when you put that together, the answer is not always to go public. emily: there has been a dark cloud over tech companies. scandals and controversies at facebook, apple has the iphone slowdown. change ineing employee more out and how much employees like to work at these companies? >> we are seeing degradation and companies like facebook and apple. it should be noted, they are still some of the best places to work.

apple is one of three companies on the best places to work list of all 10 years. they are getting slightly less but still in the top 50 places to work. emily: what about snap? >> snap is struggling. besides the fact that they have lost two dozen executives. only 44% of people would recommend it as a place to work. a three point oh rating down from 4.0 year-and-a-half ago. it is materially degrading. emily: one of the things about glassdoor is you get a lot of data but it is hard to generalize what it is like to work at a particular company. what are you doing to get more data, more analysis to beef up the opinions? itpart of what is special is that it is not generalize. i would argue the power is you can read the individual stories from people working there and here it in her own words. we have all kinds of ideas.

can all where we information on diversity and inclusion. ceo robertsdoor hohmann. that does it for this edition of "bloomberg technology". follow our global breaking news network to talk on twitter. this is bloomberg. ♪

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