♪ emily: i'm emily chang, and this is "the best of bloomberg technology." investors looking for another blockbuster quarter from netflix. we will bring you the results. as netflix, amazon and apple get out its streaming, could short form video be the next thing? we speak with jeffrey katzenberg and meg whitman ahead.

as iphone sales continue to slow, apple cutback on hiring. we have the inside details with ceo tim cook. the pressure was on for netflix this week as it kicked off tech earnings season thursday. after a robust programming lineup, investors had i expectations -- had high expectations. we were joined thursday after the results came in for a full breakdown. >> there's been a few signals. we got the "bird box" numbers. into believing they would blow away the domestic subscriber number. they just limped to exactly what their guide was.

they guided to the same -$3 billion cash flow. i think people expected cash flow to improve, and it's not going to. i think that investors are more confused than anything. they are just not getting what they expected. emily: i just want to underscore netflix burned through $3 billion in cash in 2018. that said, they say 80 million people watched "bird box." "roma" was shown in 900 theaters. it is winning awards, but the multiyear plan is to keep significantly growing 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 in this past quarter, so that is

probably their most important metric. the fact that they over delivered on scriber's -- on subscribers is critical. going forward they are going to face a lot more competition. not only are the services that are coming on board going to be competing for attention, but also taking some of their own content of the netflix platform. 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 i think is aimed partly at the company that having many other levers to pull in order to increase revenue. emily: you mentioned a double whammy. on top of that, netflix said " is bigger"fortnite competition than hbo. all things considered, how do

you see that impacting subscriber growth over the next two years? >> that comment is idiotic. i'm sorry, but i'm pretty confident i know more about hastings" than reed does, and he's completely wrong. 20 shows bythe top viewership on netflix. by top four were competitors. -- of brothers, disney, fox warner bros., disney, fox, and nbc universal. and that content is going away. by the end of 2020, i would bet all of that content is gone and on their own services. netflix is going to have less buy, which is going to

place the onus on them to develop originals. and i am going to be honest, their originals suck. they have plenty of great programs they call original. they just don't happen to own them. "ozark" is great. they were bragging about " bodyguard." they don't own that. or a they can have a dozen hundred, they are never going to replace the stuff they are losing. meantime my in snap tumbled wednesday on news of another high-profile exec leaving the company, dropping as much as 13% after revealing cfo tim stone has resigned. he's just the latest in a series to have left snap in the last

two years. there have been around 20 such departures since the company went public. huawei probed. the u.s. departments justice turning up the heat on the smartphone maker. good federal charges becoming? plus, feeling the heat of a government shutdown. what oracle's ceo has to say about its government contracts. this is bloomberg.

emily: samsung unveiled a set of inexpensive smartphones for india this week, seeking to regain ground lost to chinese rivals. the devices are priced below 20,000 rupees. they will launch february 6 on the samsung india online store, as well as amazon india. samsung says the devices are aimed squarely at the millennial market. federal authorities are investing chinese telecom giant huawei for stealing trade secrets. the probe is tied to a 2017 civil suit where a federal jury found while way liable -- found way --ay -- found while uawei liable. is at annvestigation advanced stage, and investment could come soon, according to sources. all declines to comment. the principal at albright

stonebridge joined us to discuss. >> this is a long time coming. this is not new. but unfortunately, it is getting rolled up in the news of the u.s. and china are actually trying to come to some kind of resolution on a trade dispute, so this is muddying the waters. first we have the cfo's detention in canada, possible extradition to the united states. she is still in canada and potentially facing extradition. then of course this week, legislation being introduced on capitol hill that would ban u.s. companies from selling to huawei or zte, and then the prospect of this criminal investigation. emily: even the nominee for attorney general william barr said in a hearing he is also .keptical say and indictment comes. what are the applications of that? guest: his predecessor also set

up a china initiative to enhance investigations against chinese entities potentially either unduly influencing american entities or engaged in some kind of illegal behavior. -- ofrse, while way course, huawei is at the center of that. we want to get tough against entities that are undermining the united states in some way, and huawei has had a target on its back for a long time. emily: how you think this could impact trade talks? guest: it was quite interesting in december to watch the canadians take the blame from arrest ore in the detention of huawei's cfo. it seems the chinese were trying to keep the issue out of the u.s.-china trade talk discussions. now with all of these huawei

issues this month, in advance of the buy from your coming to washington at the end of the month, i find it hard to believe that the governments aren't going to have to discuss huawei in the context of trade talks. the chinese government is becoming increasingly vocal about this being outside the rule of law. some of these supposed investigations -- of course, the department of justice has a confirmed that that hasn't confirmed that come of the u.s./china trade talks are really going to have to include discussion. emily: meanwhile, these are potentially having an impact on u.s. businesses. we seen apple cut its forecasts. iffs haven't impacted the iphone, but we are seeing a slowdown of iphone sales in china. how much of that is the trade issue versus a broader smartphone issue? meantime costs -- meantime,

cisco's ceo was on earlier. listen to his response that this could lead to another iron curtain. >> if that happens, that is just bad. we need to figure out a compromise position to help both countries get to what their trunk to get to without breaking down the fundamental value of conductivity in the first place. emily: you are behind-the-scenes talking to u.s. businesses. what do u.s. businesses actually want here? guest: 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 of course, increasingly the destination for research related to ai. our companies want to be in china. however, they don't want to be discriminated against in china. they don't want the cost of entry to the market to transfer

technology. american, european businesses agree with the trump come toration trying to an agreement with the chinese that would open up the china market and illuminate some of these unfair trading practices the chinese have certainly been killed -- been guilty of perpetrating. however, we don't want the remedy to hurt business. tariffs aren't the answer. decoupling our economies aren't the answer. business was to find a way forward with china and continue to be able to grow their. emily: there's some confusion in the understanding of some of the top cabinet officials about what they want, with the journal reported that steven mnuchin is on the side of giving china some sort of a deal. of course, the treasury department has denied that. have you think this plays out? is quite typical, of

course, among the players leading negotiations with china to have different views of what kind of leverage we can actually deploy. hasink secretary mnuchin been saying if we make some kind of goodwill gesture, the chinese will actually start to address the structural issues that, to date, they have been very slow to actually want to talk about the u.s. side. others believe that giving anything midway during the negotiations will actually decrease our leverage. so this is the kind of discussion that i'm sure is happening behind closed doors. how do we get the chinese to move on these structural issues, not just buying more imports from the united states, but dealing with the subsidies, the idea of use, the technology transfer issues? they have to be addressed for president trump to make good on a comprehensive deal on trade

with china. emily: that was a be selling co atamy, principal stonebridge. if you like bloomberg news, check us out on the radio, listen on the bloomberg app, bloomberg radio, and on sirius xm. this is bloomberg.

emily: elon musk's goal of bypass city traffic by tunneling underneath it is in need of some manpower. the boring company is looking to sell jobs from tunnel engineering to software development. they are in negotiations with the city of chicago for a subway like system there. last week it opened a test tunnel in l.a..

musk's spacex announced it is cutting can percent of its staff, nearly 600 jobs. spacex says it expects a slowdown it launches this year. theu.s. shutdown has become longest in his array, impacting the businesses that do work with the government, one being oracle. the company holds a few contracts with exposure to the shutdown. bloomberg tech's executive editor caught up with the ceo tuesday on how clients are responding. >> there's ongoing government contracts, ongoing government business, and ongoing government business that in some ways take pause with all of this. that certainly is an issue. but i think there is still optimism that something will get done here. i certainly hope so. reporter: on a similar topic right now, we are dealing with tension in europe, particularly

with regard to brexit. as we speak, we are running headlines about how much confidence there is in may's government, how hard it is going to be. can you talk about the impact of brexit on what you see in europe? guest: i think there's even a broader topic than brexit. what you see going on in france, you could make an argument that it is perhaps even more serious than what you see was something like brexit. in nationalism across many countries, not just what you see perhaps in the u.s. that has impact on business. privacy roles are increasing. when you look at the movement of

our entire industry and i.t. to the cloud come over intellectual property, software capabilities are passed up through the network, historically you can have those networks or that software located in various locations and service up to various customers across countries. now as privacy rules get stricter and stricter, that requires not just i.t. come up with the delivery of i.t. in many cases local to the country. if you had a data center in the u.k.,ving everyone in the as of brexit you would now need to have data centers in the u.k. and the eu. that is only one issue with all of that. but there are a broader set of issues. you probably hear the term gdpr. but there are a bunch of issues coming up in europe that are significant. reporter: do they cause you and your customers concern about the

andility of the region , robustor ongoing demand for your products? reporter: the simple answer to your question is no. there are complex -- guest: the simple answer to your question is no. there are complexities. you have certain rules where you can actually have employee data -- if you are a bank raised in germany and had employees in the , you don't have the ability to mix employee data. they have to stay in separate databases, even though they are both employees of the bank. same thing with financial records. the segregation of information, of data, in some cases now local

to the country, create some amount of complexity. it is more process complexity that it is not fairly technical complexity. in our technology, it is very easy for us to segregate fields of information. but it does cause complexity for our customers. make no mistake, this movement of our industry to the cloud is an irresistible force regardless of any of these issues. reporter: i want to come back to that in a minute. before we leave our macroeconomic discussion, i want to talk about the science of global economic slowdown. we are seeing it in china. there's concerns about how fast the u.s. economy is going to grow, and there's even people talking about a 2020 recession possibly. what does that mean for you, and about your sense

that growth would pick up? are you having to kind of revisit that, or do you remain is bullish on the forecast for a second half? guest: i stand by what we said on our call. we have other factors. we have it large recurring revenue business. much of our book turns to revenue, so the disability is quite good. but i think the u.s. economy is doing quite well. when you look particularly at the midmarket, i think they are doing quite well. business which serves that midmarket, the core financials and background of the company come our q4, their bookings were over 70%. they continued a trend of 35% to

40% growth, really coming from that midmarket of the u.s.. they are a great financial bellwether for the strength of that midmarket. so we see pipelines extremely robust. we see people willing to make investments in projects. so i think the robustness of the economy in the u.s., we don't see an issue. you go back to your question of a couple minutes ago, we have not seen much change in europe, good or bad. europe is going through a tough time. they certainly tried to cushion their coming out of the recession back in 2008. and you can make an argument that really hasn't worked well. you have other issues we've already talked about from a macro perspective. i think it depends a little bit where you are talking about on the globe, but these comments about the u.s., i don't see that

in any correct numbers or pipelines that we have. giles bloomberg's tom also asked about the tax rate -- the tech route over the last few months and what could reverse it. take a listen. guest: i am probably on the fundamentalist side of a few grow faster, you can turn that into earnings and cash flow, and your stock is going to perform better than the alternative. i think tech stocks, in the end, growth is important. you could make an argument that when you look at the fundamentals of tech, previous valuations were not rational in some cases. so some of this is a correction that when you look at fundamentals, makes sense. i think our case is we are growing, if you look over the past four to 12 quarters, about 3% in revenue.

we have really nothing in the company growing 3%. that is how it totals, but we have these businesses like what we have in our applications business or cloud businesses that are growing extremely fast, and we have legacy businesses we are moving out of that are declining. those businesses all align to the result we report. i think for us -- this is going to sound quite simplistic -- but growing businesses becoming a bigger part of the pie, that is what accelerates that growth rate. i don't think anybody debates our ability to turn that into upward margins and cash flow. we are actually quite good at all that. hurd withcle ceo mark our own tom giles. coming up, apple's plans to cut down on hiring. how misjudging chinese demand is rocking the iphone maker. "bloomberg tech" is livestream on twitter. check us out and follow us at onk on twitter -- at tictoc

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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 terrorists 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 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 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 help 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. any to five people 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. >> while way is seeing a lot of success. they topped out to be the biggest global phone maker after samsung. emily: why is that? >> some of their devices are innovative, and they are touting things that apple has chosen not to tout. they believe in the overall user experience. while way was 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 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. a habit in the u.s. and may have it in china, but that is what they should be pushing. third-party phones to iphones. emily: it is unusual to get

these 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 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 budget, and 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. emily: the company joins several other companies expected to make their public debut this year, including uber and lyft. they expect 500 million guest arrivals this year. evaluation came in around $31 billion. coming up, ever sit down with jeffrey katzenberg and meg whitman, and their new bet on short from video. what they have to say about 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 for 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 about subversion 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. 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 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 creative's 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 people 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 of 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. 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 looking to change the health care industry primarily by harvesting technology to get doctors to make house calls. heal has raised $69 million, and counts 100,000 house calls. they add two major high-profile additions to its right. they are adding a chairman and jeb bush is joining the board of directors. the new chair paul jacobs -- >> the 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. >> 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 than -- there is tremendous room for growth. the people who use heal, house cars 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 event 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 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. 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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carol: welcome to "bloomberg businessweek." i'm carol massar. jason: and i'm jason kelly. we are here at bloomberg headquarters in new york. carol: this week, how things operate at the world's best performing stock market. jason: we're talking about the jamaican stock exchange. also, investing legend jeremy grantham. carol: and this businessman is using his deep pockets to take on climate change. jason: and we talk about one of