emily: i'm emily chang and this is "best of bloomberg technology," where we bring you all of our top interviews. netflix kicked off the earnings season and investors are looking for another blockbuster quarter. we bring you the results. as netflix, amazon, and apple duke it out could short form videos be the next big thing? we speak to disney and hp meg whitman. as iphone sales continue to slow, apple plans to cut back on

hiring. we have the inside details of an all hands meeting with tim cook. top story -- pressure was on for netflix. they kicked off the earnings season on thursday. after a robust programming lineup, investors had high expectations. we have a full breakdown. >> they sent a few false signals so we got the "bird box" numbers. that lulled us into believing that so many people were active at the end of december. they just limped to exactly what their guide was. and then they raised their price by two dollars which comes out to about 1.5 billion dollars of higher revenue this year and they had the same negative 3 billion cash flow. i think people expected free

cash flow to improve and it will not and they expected profitability to go up in q1 and it is not. i think investors are more confused than anything. emily: i just want to underscore that netflix burned through $3 million in cash in 2018. that said, they say 80 million people watched "bird box" and "roma" was shown in 900 theaters. but they plan to keep increasing content. taking the price increase into consideration, do you think that subscribers can continue to grow fast enough to justify the spending on content? >> subscribers did grow this past quarter. that is probably their most important metric.

the fact that they over delivered on subscribers show that they are getting new people to still sign-up up for the service which is critical. going forward, they will face a lot more competition. a double whammy. not only will the services coming on board be competing for viewer attention, going forward, netflix has a lot of competition ahead of it and the price increase, in addition to mitigating the cash flow situation you referred to, is aimed partly at the company not having many other levers to pull in order to increase revenue. emily: you mentioned the double whammy and on top of that, netflix said itself it believes that fortnight is a bigger competition than hbo. >> that comment is idiotic. i am sorry.

i am pretty confident i know more about fortnight than reed hastings does and he is completely wrong. paul was spot on. december 21 they published the top 20 programs in november. 13 were the four studios going to launch embedded streaming services and literally 11 of the top 13. the most-watched stuff, the top six programs on netflix out there were warner bros., disney, fox, and universal. that content is going away.

not tomorrow. but by the end of 2020, i bet all of their content will be gone. the double edged sword is that netflix will have less they can purchase. that will put the onus on them to develop more originals. and i have to be honest but their originals suck. they were bragging about bodyguard -- it is phenomenal. but it is owned by bbc. until they can create their own stuff and "stranger things" is original. until they can have a hundred of those, they will never separate themselves from the others. emily: shares of snap tumbled on wednesday on news of another high profile executive exiting the company. it dropped by as many as 13% after revealing that cfo tim stone has resigned after only eight months on the job. he is only the latest of a series of executives that have left snap. there have been 20 departures

since the company went public. coming up, the u.s. department of justice is turning up the heat on the smartphone maker. could federal charges be coming? feeling the heat of a government shutdown. what oracle has to say about the government shutdown. this is bloomberg. ♪

emily: samsung unveiled an inexpensive set of smartphones for india trying to regain ground lost. the devices are priced below 20,000 rupees. the launch will be on february 5 in the online store as well as on amazon india. they are aimed squarely at the millennial market. federal authorities are investigating chinese telecom giant huawei for stealing trade secrets. the probe is tied to a 2017 civil suit where a federal jury found huawei guilty of stealing technology. huawei is currently facing scrutiny from six different governments around the world including the u.s., canada, and poland. the doj investigation is at an advanced stage. the principal at albright joined us to discuss.

>> this is a long time coming. this is not news but unfortunately, it is getting rolled up in the news of the u.s. and china are trying to come to some kind of resolution on our trade dispute. this is muddying the waters. we had the cfo's detention in canada. she is potentially facing extradition. and legislation was introduced on capitol hill this week that would ban sales to huawei. and the prospect of a criminal investigation by doj against huawei. emily: even william barr says he is skeptical about huawei. say an indictment comes, what are the implications of that? >> his predecessor also set up a

china initiative to enhance investigations against chinese entities who are potentially either unduly influencing american entities or engaged in some kind of illegal behavior. and of course, huawei is at the center of that latter part. this is consistent with what we are hearing from the trump administration. we want to get tough. huawei has had a target on its back for a long time. >> how could this impact the trade talks? >> it was interesting in december to watch the canadians take the blame from the chinese in the arrest or the detention of huawei's cfo. it seemed the chinese were trying to keep that issue out of the trade talk negotiations. i find it hard to believe that the two governments are not going to have to discuss huawei

in the context of trade talks because the chinese government is becoming increasingly vocal about this being outside the rule of law. some of the supposed investigations, the department of justice has not confirmed that. and even the detention of the cfo from huawei. emily: the trade tensions are potentially having an impact on u.s. businesses with apple cutting its forecast. we are seeing a slowdown in iphone sales in china. it is difficult to unpack how that is happening. in the meantime, cisco ceo was on bloomberg television earlier today. take a listen to what he had to say about this leading to a potential iron curtain.

>> if it happens, it is bad. we need to figure out a compromise position to help both countries get to what they are trying to get to without breaking down the fundamental value of the conductivity in the first place. emily: you are behind the scenes talking to u.s. businesses, what do they actually want? >> u.s. businesses want to be able to operate in china with a level playing field. and not face undue discrimination in doing business in china. what is to become the largest consumer market in the world this year and increasingly the destination for r&d research related to ai. our companies want to be in china, however, they do not want to be discriminated against in china. they do not want as a cost to enter that market to have to share their technology. they agree with the trump administration that it is useful

to come to an agreement that would open up the chinese market and eliminate the unfair trade practices that the chinese have certainly been guilty of perpetrating. however, we do not want the remedy to hurt business. tariffs are not the answer. emily: there is some confusion in the understanding of some of the top cabinet officials about what they want with the journal reporting that steve mnuchin is on the side of giving china some sort of a deal. of course, the treasury department has denied that. how do you think this plays out? >> it is quite typical of course among the players who are leading negotiations with china

to have different views of what kind of leverage we can actually deploy. i think secretary mnuchin is saying -- if we make some kind of goodwill gesture, then the chinese will actually start to address the structural issues that to date they have been very slow to actually want to talk about with the u.s. side. i think others believe that giving anything midway during the negotiations will actually decrease our leverage. this is the kind of discussion that i am sure is happening behind closed doors about how do we get the chinese to move on the structural issues, not just buying more imports from the united states, but dealing with the subsidies, the ip abuse, the technology transfer issues that have to be addressed in order for president trump to make good

on what he wants which is a comprehensive deal on trade with china. emily: that was amy, the principal at albright stonebridge. still ahead, our exclusive interview with mark hurd. why he is bullish on spending and m&a despite challenges like a government shutdown. if you like bloomberg news, listen to us on bloomberg radio. this is bloomberg. ♪

emily: elon musk's goal of bypassing city traffic by tunneling underneath it is in need of some manpower. the company is looking to fill more than a dozen jobs. it currently employs about 80 people and is in negotiations with the city of chicago for a subway like system there. last month, it opened a test tunnel in los angeles.

and spacex is cutting 10% of its staff, nearly 600 jobs. spacex says it expects a slowdown in launches this year. the u.s. government shutdown has become the longest in history and it is not only impacting government workers but the businesses that do work with them including oracle. bloomberg tech's executive editor tom giles caught up with mark hurd asking about the shutdown and how clients are responding. >> there are ongoing government contracts and business and projects that in some cases take a pause with all of this. there is still some optimism 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 about how much confidence there is in theresa may's government and how hard of a brexit it is going to be. can you talk about the business impact of brexit on what you see in europe? >> think there is 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 that it is perhaps even more serious than what you see with something like the hard brexit. there is a rise in whatever word you want to use, nationalism, across many countries. not just across some of what you see, even perhaps in the u.s. and that has an impact on business. looking at the technology business, privacy rules are increasing. when you look at the movement of our entire industry in i.t. to

the cloud where intellectual property, software capabilities are passed up through the network, historically, you could have those networks or that software located in various locations and serve it up to various customers across countries. as rules get more strict, that requires not just i.t. but delivery of i.t. in many cases local to a country. if you had a data center for example in the eu serving everyone including in 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 just one issue with all of that. but there are a broader set of issues. you probably hear the term "gdpr." >> do they cause you and your customers concern about the viability of the region? and demand for ongoing robust

demand for your products? >> to answer your question, the simple answer is no. with that said, within the context of that question are complexities. the ability now to go deliver on it becomes a bit more difficult than it was before. for example, you have certain rules where you can actually have employee data, if you were a bank based in germany. and you had employees in the u.k., you do not have the ability to mix employee data even though they are both employees. they have to stay in separate databases. even though they are both employees of the bank. same thing with financial records. you can go on. the segregation of information of data in some cases now local to the country creates some amount of complexity.

the complexity is more for the customers. more process complexity than it is technical complexity. in our technology, it is easy for us to segregate information but it does cause complexity for our customers. make no mistake about it, this movement of our industry to the cloud is an irresistible force. >> i want to come back to that in a moment but before we leave our macroeconomic discussion i want to talk about the global -- the signs of global economic slowdown. we are seeing it in china. some are talking about a 2020 recession possibly. what does that mean for you and specifically you in the last earnings call talked about -- you had a fairly upbeat view for the second half. your sense was that growth would pick up. are you having to revisit that? do you remain as bullish on that

forecast for the second half? >> i stand by what we said on our call. we have other factors including we have a large recurring revenue business. the visibility of our revenue is quite good but back to your original question, i think the u.s. economy is doing quite well. looking particularly at the midmarket of the u.s. domestic companies. they are doing quite well. our net sweep business which serves the midmarket. it is the backbone of the company. our q4, which would've ended in the summer, their bookings were over 70%. they continue to trend to 35% or 40% growth.

they are a great financial bellwether for the strength of that midmarket. we see pipelines extremely robust. we see people willing to make investments and projects. i think the robustness of the economy in the u.s., we do not see an issue there. going back to your question of a couple of minutes ago, we have not seen much change. good or bad. europe is going through a tough time. they have tried to cushion their coming out of the recession. in 2008. you could make an argument that that has not worked well in terms of returning to robust growth. and then you have the other issues we talked about from the macro perspective. it depends on where you are talking about on the globe. these comments about the u.s., i do not see that in any current numbers or pipelines that we

have. we see quite a strong u.s. emily: bloomberg's tom giles also asked him about the hard run tech stocks have had over the last few months and what was needed to reverse that. >> i am in the end a fundamentalist that if you grow stronger and you can turn that into earnings and cash flow, the higher the likelihood is that your stock will perform well. tech stocks in the end, growth is important. you could make an argument that when you look at the fundamentals of tech, that the previous valuations were not rational in some cases. some of this is a correction. when you look at fundamentals, it makes sense. in our case, we are growing -- looking at the last 4,12 quarters we are growing the entire company. we have businesses, like our applications business or the

cloud business, they are growing extremely fast. and our legacy businesses we are moving out of and they are declining. that all aligns to the result that we report. the growing businesses become a bigger part of the pie. that is what accelerates the growth rate we talked about. as that occurs, no one debates our ability to turn that into cash flow. we are actually quite good at all of that. emily: oracle ceo mark hurd with our own tom giles. coming up, apple's plan to cut back on hiring. how misjudging chinese demand is rocking the iphone maker. and bloomberg tech is a live streaming on twitter. check us out on technology. this is bloomberg. ♪

emily: welcome back to "best of bloomberg technology." i am emily chang. bloomberg has learned that apple is planning to cut back on hiring. tim cook told employees about the plan today after he wrote a letter to investors informing them of a cutback in the forecast for the first quarter. >> it is a very big problem for apple. they reduced to the revenue estimates by up to $9 billion for the holiday quarter, and they said china has 100% of the impact of the iphone sales slowdown. the big question, is it something else?

i am leaning it is something else, i do not think there is a boycott in place. i do not think people are buying phone makers from china, i think they are buying chinese smartphones because they are getting more bang for their buck. >> how much do we know is a direct result of the trade attentions when we are talking about tariffs impacting products? >> to this point, none of the tariffs discussed between the u.s. and china have had a pricing impact on the iphone directly. it has not been raised because of tariffs, up to $1000 happen -- happened before the tariff conversation begin to pick up. i do not understand the narrative that tariffs are driving down sales in china.

i think there is a point to be made about the tensions. i do not think a formal boycott is a real thing. >> there is speculation on twitter that apple is buying the equivalent of 50 business class tickets between the bay area and shanghai every day. apple is making great effort to continue with efforts in china. what do we make of that? >> my first take is how much longer will united be apples airline of choice? they held up billboards at it conference, posters that indicated those stats you mentioned. the more informed point is that is how big apple is. we like to think of tim cook, steve jobs, some of apple's other top executives, but imagine 50 business class seats

per day between the u.s. and china, that is a lot of people making these things happen, and that is what it requires to have this empire of gadgets that are producing hundreds of millions of devices. you need people flying from headquarters to where they are built. >> we are seeing apple shifts strategy toward services, where does that leave a lot of asian suppliers for apple? >> that is a good question. the thing to know, these services have to operate on something. even though apple is expanding, we see integration of itunes on samsung tv's, the preference is for them to continue to operate services on apple devices. i think they go together, and it is not going to have an impact in the short-term on asian suppliers. emily: we know the market share is shifting, and the broader chinese market is contracting.

is anybody winning? it sounds like huawei is doing better than chinese competitors. >> they are seeing a lot of success for third quarter. they topped out to be the second global phone maker after samsung. emily: why is that? >> some of their devices are pretty innovative, and they are touting things that apple has chosen not to tout. apple believes in the overall user experience. huawei will talk about their phones building, how many megapixels they have. 40 megapixels is a large number in the camera community, so people wanted that. they tout their screen resolutions, the opposite approach to apple. they are charging half the price, but have a strong range of devices from ultracheap to mid tier and expensive. they are really going after what

consumers are asking for, especially in china. >> because of that, we are hearing from local media in china that we have seen prices for iphones starting to drop in the wholesale market. could we see an official price cut from iphone soon to gain more market share? >> it is possible, that is a good point. apple is touting their trade in program and they will expanding -- they will expand this globally as well. and what this will do is show a price that is about $300 lower than it actually is, getting people to upgrade older phones. people coming from other devices, they should be pushing android device trade-ins in china. that is what they should be pushing. third-party phones to iphones.

emily: it is unusual to get these kind of dribbles from a meeting, what do you know about morale? how do employees feel? >> there are employees who are not too happy about this, we have seen the stock price decline. they have lost $200 billion since they became a trillion dollar company last year. other employees do not pay attention to this stuff and ignore it. i do not think it is having a big impact on the company overall, but it is something people are talking about over lunch at the cafeteria. >> managers seem to be empathizing the slowdown in iphone sales could be a new opportunity for innovation. what areas, what sectors could they be looking at? >> there are at least three moonshot's they are working hard on, they have at their satellite project for mapping, their autonomous vehicles self driving technology and also augmented

reality project ai project will , be there next big hit and that is what they are investing a lot in. artificial intelligence and machine learning is sprinkled through numerous other projects like siri. profitairbnb turned a for the second straight year. the company joins several other companies expected to make their public debut this year, including uber and lyft. airbnb expects to hit 500 million guest arrivals this year. evaluation came in around $31 billion. coming up our sit down with jeffrey katzenberg and meg whitman, and their new bet on short form video. what they have to say about netflix hiking prices and whether customers will stick around. that is next, this is bloomberg. ♪

emily: netflix, amazon, and hulu battle for streaming dominance, and upstart wants to upend the business. they are building a short form video library for mobile phones. it comes from former dreamworks animation studio and disney studios chair jeffrey katzenberg, and hp ceo meg whitman. expected to roll out next year, quibi already has millions of dollars from major movie studios. i sat down with whitman and katzenberg to discuss. >> we do not think we are competitive with netflix, this is a different use case. we admire what they have done, it is remarkable. that is when you invest a half hour to an hour in an experience. this is a different use case, every morning you leave with

your smart phone in your pocket, and you have in between moments during the day where you have 10 minutes where you want to see something great. we are making hollywood style high quality short form video designed for mobile. i mean less than 10 minutes. it is a established customer behavior, people watch more than an hour a day, we will give them an alternative. emily: short form has not been a huge success, so what makes you think this will be? >> you are correct, but there is almost none of that short form episodic, and virtually none of it at the caliber of production and talent that meg is talking to in terms of the best of hollywood, network cable subscription tv. the amount of contact watched on those platforms today is by a

factor greater than all the networks added together, all of the subscription, netflix, hbo, all of them. people love watching video on the go, and right now it is mostly cat videos. [laughter] good cat videos, and they are fun and funny, but the opportunity to do great quality storytelling, that is the white space. emily: you raise money from studios like disney, what is to stop them from seeing what you are doing, seeing what works, and doing it themselves? >> we have money from the studios and other financial investors, it is the first time all eight major studios and independents have come together to do something together. what they realized is this form and format could be the next big thing, they do not want to miss it. they recognize no one studio

could produce enough content to launch this service, because there is no library to buy. this is the first service where there is no library to buy. they decided to get into it together to help create a new format that will be great for their creators, their economics, they view it as a growth opportunity, it is not cannibalistic to what they do. they have made access to their best ip and talent available to us, which is what is important because a large percentage of the talent works for the studios. emily: there is skepticism you can produce enough content? >> there is? where is that skepticism? emily: an article about it says how some creators are creating shows and it is too much work to create something for a short-term form, and they are not sending you their best projects. >> fine, but honestly that has nothing to do with the facts of

what is going on. emily: tell us the facts. >> every single studio are making content for us, are giving us access to their best ip and talent. you look at the roster of people who have rushed in here to collaborate and make it work, and make shows for us, whether jason bloom or guillermo del toro, steven spielberg, mark burnett, i could go on and rattle off for 10 minutes the talent that are coming to this because they are excited by the opportunity financially. it is extremely rewarding model for them, which is why studios are getting content to us read -- you talk to the agents today and they say there is no room where people are not discussing how do we get in the door and make stuff for quibi today. i do not know the article written, but it is literally 180

degrees the opposite. emily: names like james corden, tom cruise? >> all of them. they are at different stages. it is inappropriate for us to share business before they are ready for us to do it, but there is nobody we have talked about, and names mentioned here, who have not expressed extreme interest in working with us and making content for quibi. emily: we kept that conversation going. i asked about quibi's pledged to have 5000 bytes of content, are they on track? >> we have things in production. it is early, but we do not foresee a challenge of developing this amount of content, we are not a studio. we are not developing or creating anything, we are working with our investors and

partners, which is the power of many. we could not do this if it was one studio working with us, we need everybody in the boat producing for us, and so far they are. >> it is not just the content itself. for sure the content is unique and differentiated in every respect from what people are seeing today, or what exists on these platforms. but equally important is the way in which they are going to get it. no one has built a platform that is a mobile first which is as exciting and engaging and unique and the experience of what it means to watch video on the phone, on the go. everything today is imported from television onto the phone as opposed to build it from the ground up. it is why this partnership is so essential. that is where the power of one plus one can actually make quibi happen. i could not do it without meg.

i cannot build this company without her knowledge, expertise, leadership, management, all the things. >> likewise, i cannot do it with jeffrey. his relationships, his creativity is essential. emily: ai, metadata, even the technology that can switch a video from landscape to portrait on-the-fly. >> watching video today on your mobile is a better experience than six years ago, but it is not as good as it could be. optimizing for this device, and how to make creatives and the work they create incredible on a mobile, there is a lot of room and chance for innovation. machine learning. how do we know what you want to watch before you know you want to watch it? emily: do you think people will pay five dollars or eight dollars a month for this? netflix just raised its price to $13. do you think consumers will

stick around? >> i think they are, because whereas there is an unbelievable amount of competition in the traditional form of one-hour television, which is what everybody is, what comcast is, what apple is doing, what hulu is doing, what amazon is doing, hbo, showtime, we could list another batch of them -- here are the companies that are doing super premium short form, watch it on the go on your phone during the day -- quibi. our competition is ourselves. we must rise to deliver something that is an outstanding experience for people on the platform and device, and the quality of the video, and the storytelling. emily: i am curious what you think about other players, like netflix raising prices. is that the right call? i hear binary views, either

winter is coming or they will win it all. >> i actually do not know, they have done a spectacular job building an incredible and powerful platform. people love what they are doing and they continue to grow. i do not know how to cut up that high. the thing that is fantastic about it is it is not our problem. emily: that was quibi founder jeffrey katzenberg and ceo meg whitman. using tech for health care, a startup is bringing doctors directly to you. our discussion with their ceo and new chair. this is bloomberg. ♪

emily: in 2015, heal has been

-- since 2015, heal has been looking to change the health care industry primarily by harvesting technology to get doctors to make house calls. heal has raised $69 million, and claims more than 100,000 house calls. they add two major high-profile additions to its right. -- to its ranks. former florida governor jeb bush is joining the board of directors. new ceot up with the on >> thew chair, wednesday. next step is serving the medicare population. we worked hard to get a regulatory change to make house calls to all 55 million medicare patients in america. that is the audience that needs heal most. we are super excited. >> the apple watch, fitbit, your experience in chips, what attracted you? >> i have been really excited about using technology to improve health care, and we have

had the idea of doing something like this a long time ago but the technology was not there. he tried to build it at qualcomm, and now the environment is right, the technology is there, and these guys have put together a phenomenal service. emily: doctors on demand, doesn't everybody want that, and why hasn't it worked thus far? give me the scale of what you are doing. >> 100,000 house calls is a lot, but it is less then an average kaiser facility will see in a week. there is tremendous room for growth. the people who use heal, house calls are more convenient and better health care because the doctor can see the home environment and the kinds of things for care delivery. we are at an exciting point and glad to add jeb bush to the board of directors.

emily: how many house calls will be done? traditional visiting the doctor will hopefully get better. >> i like to think, and i am an optimistic ceo, i think this is the future of medicine, and your family doctor should come to your family home. in 1970, care was in patients homes, and we can go back there with more care that lowers health care costs. >> tim cook said he thinks apple's greatest contribution to mankind will be in health care. do you agree with that? >> there is no question, you can -- wearable devices, you can prevent diseases before they turn into something more complicated and expensive to treat and affects your life. that is an area heal is focused on. we can monitor chronic

conditions and let doctors know when something is going wrong, and a doctor can take care of you. that will change the way health care works. people think about technology and medicine as dehumanizing a person, we see this technology as re-humanizing medicine, bringing the doctor back to personal contact with the patient for a longer time where they live and understanding their life. emily: is the goal growth, is it improving the experience? >> the goal is to maintain the high clinical quality. my wife is our chief medical officer. >> doctors are employed by you? >> yes, she manages that team, and the goal is to grow rapidly so we can serve millions more people while maintaining the standards set. and to innovate technology which gives the doctor more data to deliver more precise and proactive care.

ideally your doctor know -- knows something is wrong with you before you do. emily: we have been talking about apple, the revenue cut, what is happening in china, are you concerned trump's hardline on trade could lead to the chinese doubling down on their technology, and the u.s. losing its dominance in cellular technology? >> a lot of innovation is still happening here, and we are focused on driving the next generation of technology, and building new technologies that do not require new ways. the game has changed, and we know what that game is, and we are trying to lead it. we will work with chinese partners, and that is the way the industry has been, a global industry. if the trade war rips the world in two pieces, hopefully people come to a solution.

you never know how these things will go. we can work together and grow the overall form. getting the technology out there, it can improve people's lives. heal is a great example where we take fundamental wireless technology and make people's lives better in a different industry. emily: heal's paul jacobs. that does it for "best of bloomberg technology." you can tune in every day. and tune in for our daily coverage from that world economic forum at davos, switzerland this coming week january 21 to 25 right here on bloomberg. this is bloomberg. ♪

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>> coming up on bloomberg best. the stories that shaped the week in business around the world. >> it is clear that the house does not support this deal. >> this is a catastrophic defeat or this government. >> theresa may heads back to the brexit drawing board. parliament votes down her plan. >> i do not know where this takes us. >> this is incompetent chaos. >> wall street has something to digest as a parade of u.s. banks march out earnings reports. >> goldman had its first quarter -- worst quarter since the crisis in terms of financial trading. >> there is nothing to get excited about, one way or the other. >>