simple. easy. awesome. click or visit a retail store today. ♪ emily: i am emily chang in san francisco. this is "bloomberg technology." coming up, tesla letting go of thousands of employees. can the competition take advantage? plus, trade hope? china makes an offer it helps the u.s. can't refuse, a plan to shrink the trade deficit to zero. talks are set to resume. amazon under pressure over its facial recognition software. why shareholders are now joining the debate.

but first, shares of tesla tumbled after elon musk announced a 3000 job cuts. shares plunged 13% after he posted the email he sent to employees notifying them about the layoffs. this is the biggest drop since september 28, with shares at their lowest level since january 3, following tesla with a profit last quarter. i want to get to our next guest is standing by. he has a buy rating on tesla. it is sad when anybody loses their job, that is it encouraging or discouraging in terms of the business? >> that is a difficult question. tesla today are at a turning point. they have been selling 60,000 every quarter at a price of $55,000. in terms of market share, it is 60% of the u.s. market of the

premium segment. we know this level of deliveries in the u.s. at that price point is not sustainable. we know it has been supported by strong subsidies. as we get into 2019, tesla gets subsidy cuts, has to lower prices, start shipping cars, and then has to bring in lower-priced skews to make the 35,000 model threes. they need to adjust their costs face. that is the meaning of the cost cut today. if you think about the numbers, this will reduce its operating costs by $100 million, which is what tesla is losing in price

cuts to consumers with the price cuts announced earlier. >> this chart shows tesla's pre-cash flow turning positive in the last quarter. elon musk is saying they need to make job cuts to get the cost of the car down to $35,000 to reach a mass-market, but will they have enough people to meet production numbers and reach that market with these layoffs? >> the best way to answer the question is looking back at last spring, when elon musk announced in a similar fashion that he was laying off 10% of the workforce of tesla, that wasn't the end of spring. after that, tesla succeeded in producing the model three, broke even, and generated a strong forecast. i think we have a similar situation today. tesla since the summer has grown

a lot, but is taking a step back, implementing new efficiencies, taking people out, and from that will be able to grow. what i expect guided by elon musk's comments this morning is tesla to start the year just profitable and to be able to improve ability during the year as it keeps growing production and deliveries of the model three. emily: i have another chart showing that because of the stock plunged today and these layoffs, tesla has lost the market cap crown for automakers. tesla is the white line there.

you can see gm slightly surpassing tesla. we know tesla is the market leader in ev's. there are competitors coming to market this year. sales will be slow initially, but could take off next year. is there an opening now for the competition? >> there is an opening for the competition. tesla is showing this market is very strong. can you imagine capturing 60% of the addressable market in the u.s. in the first two quarters for the model three? as you said, tesla has the first mover advantage. it has been designing, manufacturing, improving electric cars for more than a decade, and when i look at cars announced by competitors coming into the market this year and next, i see from a technological standpoint that they are behind

what tesla can do today. from the competitive standpoint, these cars are still expensive in the higher end of the market, and none of what you can see announced by competitors today can compete with the model three. emily: elon musk has broken ground on a factory in shanghai, giving some advantage over automakers who make their cars outside of china. this will enable tesla to avoid tariffs on its cars inside the country, but the chinese economy is slowing and we don't know what the health of the chinese consumer will be. how optimistic are you about the factory in china giving tesla a significant advantage? >> the factory is not built yet. it is still to be built, ramped. it takes a long time. the plan is to be able to start assembling cars in shanghai at the end of this year. by then we will have a much better perspective on the global

economy, how consumer demand is evolving in china, and at that point tesla can adjust its investment plans to serve as precisely as possible the demand. emily: tesla has always been a divisive stock. you have a big camp of passionate true believers, and the big camp of skeptics. which of those do you think this you will be proven right? >> i hope the optimists will be proved right. as you can imagine, the reason is the year looks like a strong ramp. we will fall off that cliff in the u.s. of strong demand going

away, subsidies being cut by 50%, then down to zero in the summer, and as that happens, tesla will ramp its production outside the u.s. in europe, it is a large market, tesla will introduce leasing to encourage demand, and most importantly, tesla will introduce lower price points. i will insist on the last one. as tesla takes its prices down, it should meet increasing demand everywhere in the world. that is the reason why i am optimistic this year. emily: thank you for joining us. alibaba is bracing for a

slowdown in china's economy. it is cutting its spending on travel and postponing hiring. jack ma warned that the trade war with the u.s. could have a much longer impact than anticipated. coming up, netflix shares tumble after fourth-quarter results. we will look at user growth and cash burn and original content next. check us out on the radio, listen on the bloomberg app, bloomberg.com, and on sirius xm. this is bloomberg. ♪

♪ emily: netflix reported a lackluster fourth quarter. the company shares tumbling after revenue came in below wall street estimates. attracting millions of subscribers wasn't enough to boost slow sales growth. justin patterson joins us. also, i reporter who covers the entertainment industry. justin, are you underwhelmed as investors are today? >> not really. you have to look at it from a big picture perspective.

netflix had a 30% move into earnings. you had expectations high in the wake of the recent price increase. netflix had to blow numbers out across the board. you had some upside and margins were light in q1. that was mainly a function of fx, so we think this is a transitory facing issue. >> we are starting to get more information from netflix about subscribers, viewers. take a listen to what reed hastings had to say about how much share of the broader tv market they are snagging. take a listen. >> there are one billion hours of television content being consumed a day. we are winning 10% of it. that is why disney has great content. we are excited for their launch. maybe they grow over a couple of years to 50 million hours a day, but that is out of the one billion.

emily: we have talked to a lot of analysts who are pessimistic about the future of netflix given that companies like disney are pulling content and will be more competitive in the future. talking to creators, most are still in awe and don't think there is a problem at all. what is the unveiling view their? >> there is reason to be concerned if you are netflix, because disney, at&t, comcast, they are coming online in the next 12 to 18 months with rival streaming channels, and they are creating exclusivity around their own content. there are numbers coming out about how much we will see the cost of content and the

investment in content balloon for the media industry. if you listen to reed hastings, he has talked about this threat. they have been preparing for that. they talked yesterday about how a vast majority of their content that is watched, like the most watch content, is their original stuff. they have a ton of stuff on there, but what people are watching his original. were talking about "bird box" and other shows, so they have been good at getting original content to keep us entertained. as there is a plethora of streaming entities, how will they survive? to answer your direct question about creators, they are happy to sell their stuff. let's be real. they are happy to get their

stuff sold and be seen. it is interesting to see a film like "roma," which is in all its on favorite to win best picture next month. it will be an important moment for netflix if they come close to winning, because it is a watershed moment. they have never been close to that before. emily: golden globes and a favorite at the oscars. justin, you were nodding. i have this chart in my bloomberg showing how the rise in subscribers has mirrored the rise in the stock. do you think investors will be ok going forward with strong subscriber growth, even if revenue does the keep pace with expectations? >> the revenue piece solves itself. to the earlier point, netflix has the viewership, nearly 140 million subscribers around the world.

we think that number is 200 million by 2020. when you go back to the creator problem, netflix solves distribution, discovery, where disney and comcast have to build that global distribution. so from a netflix perspective, it has the audience. adding one dollar or two dollars a year in pricing is how you get to long-term free cash flow growth. emily: what is the word on the content that disney andes competitors will offer? do we know -- these competitors will offer? do we know that it will be spectacular? >> we know that the properties we are talking about our marvel, star wars. for example, with the lucasfilm properties, netflix has that this year, then cuts it off. i don't think it is that important for netflix.

that is not how this business works. i think it is interesting. take "bird box." people talked about the fact that a lot of people saw it. 80 million households saw it. but we are talking about fundamentally different businesses. people at home streaming is different to disney getting people into theaters to see "star wars." they will have potentially three more star wars movies and a whole world of star wars spinoffs they are working on. they have all the marvel content they will have on their platform, and they are very focused on content that not only gets people on their streaming platforms, but that can be monetized through theatrical, products, and other things.

netflix is not interested in that. they do sell t-shirts, so i don't know. emily: justin, the last word. >> i agree with that view. netflix will be competing in a different area than disney. those films named our big budget pictures. "bird box" was not that expensive to make. that gives netflix a lot of content that can buy. emily: thank you both. lots to watch, at the very least. still ahead of a new details in the courtroom showdown between apple and qualcomm. we will discuss next. this is bloomberg. ♪

♪ emily: when jeff williams told the courtroom that qualcomm shut off the chips apply for iphones,

it was compelling testimony in the antitrust case. the ftc argues qualcomm won't sell chips of customers don't pay hefty licensing fees. any mail exchange shows the relationship may have broken down for other reasons. for all the details, ian king. you know the story better than anybody else. you have been surprised as we have, specifically apple's testimony that qualcomm cut them off from what we know that is only half of the story, right? >> qualcomm has said we will supply apple, then he says this in court. ok, that is not what we have been told. what we find out from the email exchange which he referenced in court was they were arguing they did not want to deal with each other and there was bearish complications, but it wasn't

anything to do with the licensing. emily: what does this mean? >> it depends on how the judge views this. we have had a week or more of the ftc making its case. now qualcomm has a chance to fight back and to explain itself and show why it is not guilty. >> the judge has made some interesting moves. she kicked people out of the courtroom, and wi-fi was not working, which is ironic. >> you are right. it is no secret that the judge doesn't take any messing from anybody. if you mess around and don't know what is redacted or what should be redacted, she has zero

patience and docks time often and orders people out and is not messing around. she is running a tight ship. emily: how much longer does this case have to run? >> another week or so, but three or four more days of testimony. emily: in your view, who is winning? who has the upper hand? >> as i said, you remember they, the government goes first. they have to set out their case. they will try to make qualcomm look as bad as it can. qualcomm looks like it is losing now. qualcomm has a chance to say that is not what it was and to explain themselves and make a better case. emily: the ceo of qualcomm hopes they can get back to doing business together, apple and qualcomm. after this ugliness, is that possible?

>> if you read the emails, there was an attempt by both sides to forget this licensing and deal as a chip company and phone maker. even in that relationship there was distrust, so your guess is as good as mine. emily: airbnb to acquire hotel tonight. sources told the journal that talks have often cold, but could be revived as it prepares for an ipo. the acquisition could make it more attractive to investors and demonstrate growth potential. airbnb is considering building its own competitor and joining with boutique hotel chains. coming up, elon musk's hiring and firing spree. we will look at what is going on with spacex and the boring company next. this is bloomberg.

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♪ emily: this is "bloomberg technology." elon musk announcement that jobs,is coming over 3000 tesla shares falling by nearly 13% in friday trading. it has been something of a hiring/firing week for elon musk led companies, as spacex is company about 600 people. the boring company has announced it is hiring 80 new staffers. to discuss, let's go to new york with our bloomberg businessweek columnist. you think you made a new year's resolution or something to get the workforce right at all his companies? >> you do wonder.

one of the interesting things about elon musk and this interlocking group of companies is that there aren't bright lines between them. musk is famously going back and forth between spacex in tesla, aspects of the tesla operation are located close to spacex, with shared staff. they are two different companies, but at times the lines blur. it does feel like maybe while mosque was looking at test was getting this company as close to profitable -- as profitable as possible, he may have said maybe it is time to trim some at spacex. i don't think you are wrong in that assumption. emily: so why are we seeing these layoffs at spacex? the coo said there would be fewer launches this year. why? >> the thing that's happening with spacex is it is transitioning from its falcon 9

rockets, which are the ones that everyone knows, to this new or a think they just change the name. biggerly it's a much rocket designed to carry much heavier loads. some of the development is changing. the other thing is the falcon 9's are reusable. is whole point of spacex that they would reuse these rockets to bring the cost down. now they potentially don't need to manufacture as many rockets, because they will be able to reuse them. that was good for his overall vision of making space much more accessible to humanity, but maybe not so good if you are an engineer or worker. emily: the boring company, the scale of hiring is much smaller, hiring about 80 people are so. that, givenant is the nascent stages of the project and the potential payoffs?

>> this looked very much like a hobby a few years ago when we first started hearing about it. i remember when elon musk told me about it, it sounded not entirely thought through. it is lookingn, more like a real business. something like 80 employees with job openings. so i don't know. thisems very early, demonstration track that they showed off in los angeles looked, while kind of cool, nothing like a finished product. on the other hand, this is what elon musk has been famous for, taking these crazy ideas and turning them into businesses. >> all right. max chafkin, thank you so much for being with us across all of that. we will be watching to see how the year pans out. now to a story we are following. the continue to trade tensions between china and the u.s.

bloomberg has learned that beijing has offered to go on a six-year buying spree, wrapping up imports from the united states. reportedly this means beijing would increase imports i more than $1 trillion over that period. can see just how big that u.s. trade deficit with china is. the last month of this is the biggest difference on record between the two countries. for more, i want to bring in our senior trade reporter. actually the trade deficit has widened in the last few months, not narrowed. can the chinese actually close the trade gap by 2024? >> depends who you listen to. if you listen to most economists, they would argue that trade deficits are the result of a confluence of factors, but economists aren't the ones that drive the political messaging in washington, and donald trump, one of his campaign promises was to attack the trade deficit with china.

the irony that hasn't been lost on many people is that in the last two years it has widened, as that chart shows. donald trump needs to deliver something. he has been focused on these talks, reducing the deficit has been one of his clear goals. the chinese have been listening and they have come up with a a golfer to try to lure him into a deal. emily: so let's say this is possible. what with the chinese by from the united states? >> you have hit the nail on the head in terms of whether or not it's possible. there are a lot of questions about how possible it is. the u.s. now exports something like $150 billion in goods per year. they are talking about ramping it up to $600 billion per year inside six years. that seems improbable. it would mean buying a lot more soybeans, we have been hearing about soybeans, about $14 billion per year now or before

the trade wars hit. a lot more lng, a lot more claims, a lot more manufactured goods. one of the drivers of the deficit is not just with the chinese by but what american consumers and companies by. how do you tackle that when we will still be buying a lot of smartphones and left tops from china for the for seeable future? emily: lest i cannot have the u.s. has reacted to this plan. don't folks want the chinese to close that gap, but in like two years, not sex? >> exactly. this all came out of negotiations a couple weeks ago in beijing, these mid-level working group negotiations, the first time the chinese detail this plan. the initial reaction was skepticism. but also to ramp up and say, hey, we would like to see you

close the deficit in two years, which gets into american political cycles in the 2020 election. clearly donald trump wants to demonstrate real change before that. emily: exactly, because beyond that, it's not just that the u.s. wants the trade deficit to close or once the chinese to buy more goods, but wants them to offer some other things in return when it comes to intellectual property and forced transfer of i.t. >> exactly. that has been one of the big demands from the u.s., change in the chinese ip. these tariffs are based on a report that alleges decades of state coordinated theft of american intellectual property and technology. washington wants that to end. it's not just donald trump, there's a broader, bipartisan consensus, which gets into some of the politics of this. if donald trump to take a deal big numbernvolved

purchases from the chinese, is $1.2 trillion offer, there would be a lot of people in the business community who would be disappointed that he didn't used to the leverage to get meaningful changes out of china. emily: all right. shaun donovan, thank you so much for that update. ok. coming up, competing with online shopping. ulip's pashtot bring tech savvy to brick-and-mortar stores. that's next. this is bloomberg. ♪

♪ emily: retailers have invested heavily in e-commerce and in-store technologies, but are they ignoring their biggest advantage? says storeform tulip

associates are the biggest advantage that retailers have over amazon and other big-time e-commerce players. tulip is looking to put the spotlight back on peer-to-peer help when you get inside stores. joining us today for retail transformed, tulip ceo. currently there are 60,000 in store associates using the mobile platform across 3000 stores. what we are seeing is that they areetailers, what doing is they are giving their associates devices and ipads, and they are putting devices on them. theore is one that has ability to give -- it allows them to communicate with and allows them to answer product questions.

tulip is about bringing intimacy back into retail. emily: i've had several experiences with store associates, it's not working, it takes longer, i have no idea if that's because of your software or someone else's. in some ways, it seems like it is still going to take more time to have these technologies properly integrated into the in-store experience. >> right. i think what you saw over the last few years was that retailers are trying to build ,his application themselves giving it to store associates. and we wanted to know what if we could build a more robust piece of software, to make a more reliable. emily: amazon could use aim data to get merchandise in front of

u.s. soon as you get to the site. how do you combat that? >> that's the coolest thing happening at a macro level -- as you see the rise of the economists, retailers feeling much more impersonal, what these retailers are doing is they are reacting to going the opposite direction. we can establish personal associations that you work with every day and they now have tools to remember your names, send you a personal message. that as thef unique rise of the internet makes things feel impersonal, retailers are reacting by going the other direction and using technology to make it intimate. emily: does this require associates to get proper training, or is it more intuitive? >> that's a cool thing that we had to learn over the last five years. we were deploying tens of thousands of associates inheriting the software, and we had to figure out how do we get

them to use the application and learn it? one of the biggest investments was focused on user interface. we designed the application in cupertino with apple, and a lot of the work we did to make the application feel native and like them other app, it allows to pick up the device and feel like they know how to use it. emily: all right. glad you mentioned that partnership with apple. thank you so much for stopping by. coming up, amazon facial recognition software has sparked a debate with civil liberties groups. how investors are cranking up the pressure, next. this is bloomberg. ♪

♪ emily: welcome back to "protect." breaking news out of washington. the trump administration is preparing an executive order that would significantly restrict chinese state-owned telecom companies.this would impact huawei, zte. the president has been very vocal about his concerns, national security concerns, around these companies. we don't know yet the details about how this order would actually be written, but it would give greater authority to the commerce department to review products and purchases by companies connected to adversarial countries,, one of which of course, is china. we will continue to bring that story as we have the. meantime, last years civil rights groups came after amazon's facial recognition software. now amazon shareholders are getting involved. friday, a resolution was filed proposing the tech giant

selloff software until the board determines the tech doesn't threaten civil liberties. the aclu among others have raised concerns about potential bias and reliability. joining us to discuss, spencer so for. give us the backdrop here. we have already horse stories about facial recognition particular amazon in misidentifying people. has there been progress? >> amazon definitely wants to highlight some of the positive ways this has been used, and they bring up things like preventing child abductions and spotting missing children in amusement parks as well as the softer applications like identifying celebrities at events. police department we spoke to put it in perspective. the monthly bill was $12 to use

this service, and they would use this to quickly and efficiently cross reference either photos of suspects or even surveillance video footage and cross-reference that against a database of 300,000 jail booking photos. it's a very easy photo for them to identify criminal suspects. amplifyo how does this the blowback? the aclu was one of the activist groups that complained about this last year. there was another one as well. now what we have is one spilling into the boardroom. the amazon shareholders tend to vote in lockstep with what the board recommends, so it's not a huge threat, but it amplifies the debate a little bit and brings it into the amazon board

room for more discussion. they are not saying don't sell it, they are asking the board to check out the technology, only sell it if you can guarantee it will not be misused to violate civil liberties. emily: so what is next year? -- next here? >> you will have a vote of shareholders, but beyond that, there's this ongoing tension and debate about the use of this technology. there has even been talk about potentially regulating its use. that is where amazon has said they are working with government agencies and law enforcement agencies, educating them how to use it and dialogue the accuracy levels, but emphasizing that it's not the single determinant of a criminal investigation, just one of many tools. the next thing we will see is a lot more attention between the two sides on whether this technology is ready to be deployed or not. emily: all right. spencer soper, thank you so

much. i want to get back to the developing story we told you about. the trump administration is preparing an executive order that could significantly restrict chinese state-owned telecom companies from operating in the united states, given national security concerns. here to discuss, alister phone. this order women specifically named companies, but we know that that is what this order is addressing, right? >> that's right. one of the key questions to ask about this is, is it going to let the commerce department bans sales in the u.s., or is it going to ban sales of telecom equivalent to countries that the u.s. deems unworthy or dangerous, like iran? will they be in trouble for trying to operate with iran and lying to banks around that? perspective, they

have written the u.s. off as a market already, but they are huge in africa, they were huge across europe, they are huge across asia. if this order goes out and says he can't work with iran and all these other countries, that would be an extra major borrow. huaweiobviously, has pledged to take global leadership of 5g. meantime you have other countries pushing back over national security issues, not just the u.s. you have the cfo, the daughter of the founder, under house arrest in canada facing extradition in the middle of a trade war between the united states and china. where is most of the pressure coming from? is the administration aligned with the doj, aligned with what's happening in all these other countries in terms of this

action being taken? things,the doj side of certainly in recent months we got messages from people inside the doj who said it is a major concern. i don't think it's just politics. arey: and in some cases we talking about issues that dated back to the obama administration. there has never been any solid evidence of something sources toldt doj us a month ago to step back and cte --if while way and it would be very easy to collect information about what's going back and forth. emily: at the same time, isn't this a helpful lever to be doesn'tin trade talks, it put the chinese under more pressure to make a deal? there washis morning,

news that bloomberg reported about this idea of china's pledge to buy trillions of dollars of extra goods. i'm not sure what those goods would be, that's a lot of money. but it shows that maybe they are giving way and may donald trumps negotiating strategy -- maybe he's piling on. emily: all of this coming up into tech earnings season. the have been looking at chipmakers and suppliers to smartphones, the iphone. what sort of earnings results are we expecting across the board, given the broader political and economic uncertainty? >> government business in the u.s. delayed a quarter because of the government shutdown, big government software purchase deals, those things probably delayed, so that's not great. but in general, the cloud is still good, still growing.

enterprise hardware stuff is not quite so good. the only real standout is cloud providers and digital advertising, probably turning away. emily: meantime, we are hearing both sides mayat be eager to make a deal because both are concerned about the economy, the pressure that we have seen these companies facing. meantime the president has other priorities. we just got a headline that he'll make a major announcement on saturday with regard -- we are in the midst of a government shutdown, along with the u.s. government shutdown in history any sense that this is more of a priority than the trade war, which could lead him to acquiesce there but not here? do we know which order the

priorities are in? >> if you are going to order them timewise, the shutdown is probably the highest priority. the next one on the list is the trade war for sure. if the economy really slows down, especially the stock market doesn't do well, that's not great for president trump. i think china has a lot more to lose. their economy has suffered more --far, their start market stock market sell a lot more. i think the chinese has a lot more to lose. emily: thank you so much for all of that. we will continue this conversation next week. that does it for this edition of "bloomberg technology." be sure to join us next week for full coverage of ibm and intel earnings. we are also on twitter. follow our global breaking news network. this is bloomberg. ♪ amazon prime video is now on xfinity x1.

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