chang in sanily francisco and this is "bloomberg technology." the u.s. department of justice outlined its case against huawei with formal charges, accusing the smartphone maker of fraud and stealing trade secrets. corporate america is pointing the finger and china for disappointing zones. nvidia cutting its outlook. is it a bad sign for earnings to calm? -- to calome?

first to the lead. u.s. prosecutors filed criminal , allegingainst huawei it stole trade secrets from american rival and committed bank fraud by doing business with iran. huawei has been the target of a broad u.s. crackdown including allegations of spying. the action comes to days before pivotal round of trade talks between the u.s. and china. tom and selina wang who has been following huawei. that's what is the significance, now that we know the specifics of the u.s. charges? has beenvestigation going on for years. area is the ip that issue,

allegations that they stole intellectual property from t-mobile and a piece of a robot .hat mimics smartphone use that is part of it. another part is the rest of the cfo. she was arrested several months ago and they are charging that she was conspiring to commit bank fraud and they used a --sidiary called skycom skycom. there's a 13 count indictment in brooklyn and two charges in washington state. emily: and the deadline for the u.s. to send an extradition request to canada is coming up in a couple of days. what do you make of the details here, now that we know the specifics of what the u.s. is moving forward with terms of formal charges? tom: it's a very serious case. it was done by the same group

that brought the case against hsbc of you years ago, in which they were accused of laundering money for mexican drug cartels and violating u.s. sanctions. fearede of the most cases brought by the justice department against a company, especially if they have that evidence and what they are alleging here is that huawei essentially hid the fact that they were still doing business , in an affiliate in iran violation of u.s. sanctions. emily: they also say that huawei moves witnesses back to china so they could avoid penalties. talk about the broader context. it has been a busy day for huawei, some not good news coming for them out of europe and around the world. >> and there are also charges

the that -- that they were actually giving bonuses to those who were stealing these information. years, there was not a lot of solid evidence against what exactly huawei was doing wrong -- doing wrong. a big argument is how much of this is national security risk and how much is a concern that huawei is becoming a leading developer of this next generation of wireless technology as well as now becoming the world's second-largest smartphone maker ahead of apple. this announcement and increasing evidence that it is a mix of both those regions -- reasons. as a threat to democracy and western ideals. emily: the u.s. has long feared thathuawei basis equipment

the chinese government can use to spy on the united states. as i understand it, there is no concrete evidence that the equipment can or ever has been used for spying. the charges that were announced today have nothing to do with that, correct? ,om: from everything i've seen and i'm still waiting to see the official documents in the case, but so far we haven't seen anything related to that. i will note that when the justice department in november announced a broad prosecutorial effort in cases related to china, one thing they noted was specifically looking for cases where the five g network could come into play, if there was anything they could develop in that space. so it is on the minds of u.s. prosecutors to be looking for that. emily: meantime the trade talks getting underway later this week. this is a critical round of talks and at ratchets up the

level of aggression the u.s. is demonstrating. increases certainly the dark clouds over everyone's head. it is unclear what sort of retaliation there will be, of talks will break down. there has been conflicting evidence about how the trade talks are doing. has denied all of the accusations. we've seen the billionaire founder come out and personally say they did not engage with the chinese government and they would not provide information on clients if this were to ever happen. it is important to note from the u.s. administration's perspective, it's the past is not an issue as much as the future. they are taking these steps now. walk us through the timeline, now that we know the charges and we have the deadline for the extradition request in a couple of days. what is next?

tom: they have served the indictment, and it times when you're dealing with chinese companies, some of the more rudimentary actions in a criminal case can take longer than normal, but i really think that extradition will be a big piece of this in being able to see it they are able to successfully extradite her. emily: meantime, more broadly, huawei is one of the top when it comes to equipment and 5g, which is what all countries are trying to toward. in europe they came out with report saying if there is a ban will seriously be at risk of falling behind because we cannot buy their equipment. does, andat huawei they provided cheaper than other companies. is many in the world, huawei

the best option for them. , from their perspective, if they are blocked from certain countries, they will just develop -- double down in these markets that rely on huawei technology. it will be interesting to see how it plays out, which countries agreed to the u.s. demands to know longer use huawei equipment. emily: there's a lot to follow and we will bring you all the latest as we have it. aftershares fell monday reports of saudi arabia's stake. it faces little exposure if the stock drops. saudi funds played a key role in elon musk short-lived efforts to take tesla private last fall, but it fell apart after he failed to line up financing.

many of tech earnings to look ahead to this week along with some mornings. ofwill speak with the ceo arbor kawasaki about where the bright spots might be. this is bloomberg. ♪

ago, netflix came out with fourth-quarter results, and they were mixed. they added a higher number of subscribers, but missed on revenue.

the company is expected to add 30% you are new users versus the first quarter of leicester. i guess has a substantial investment in netflix, apple, amazon, and alphabet. overompany has invested $800 million in second media companies. garber, ray to have you on the show. there have been underwhelming reports, do you think it is a warning sign for some of the other companies that you have stakes in? ross: in a way, it absolutely is. it shows the trade war has two losers, the united states and china. when you go to war with your biggest supplier and also your biggest customer, we are seeing the effects, and it is hurting american companies. i we see the companies that have less exposure in china will google which amazon and

are not allowed to do business in china. companies like nvidia and apple mpsl have to deal with the lu that come with what looks like a decent slowdown in china. we know that apple cut its forecast very dramatically. what is it mean for any potential upside that is left? ross: i think there is upside because the stock has moved down to a violation that doesn't account for the long-term cash flow potential, as well as the real growth of their services business. it is clear that apple as a product company has reached its maximum potential, but as a services company, it's an inning two or three. if apple does anything bold and services instead of sticking to its tailwind, they can make a big impact and grow the business more substantially than they are today. outy: so if anyone comes

ahead, you think amazon, google, who else? our basic premise is that basically four or five companies overmassive monopoly power their respective areas of business, like google for example in online advertising. is the positions cannot be changed without government intervention. ,s these companies continue like netflix on his global dominance of the entertainment industry, as it continues expect interference, we companies to continue to go profits -- grow profits and users. this could go on for a long time. the only risk is really government intervention. emily: we have congress looking at potential privacy laws and regulations that would impact google and facebook. there's also potential regulatory threat against amazon which has attracted the ire of the president.

one option is just to rent out a lot of rooms in the trump hotel in d.c. and hope that will work. we don't think the u.s. can beat tech companies, but we do think the europeans can. the european approach is completely different and we are seeing that effect on these companies. we look to our european friends a lotorce these things more than here in the u.s. it's something microsoft dealt with a decade and a half ago and it hurt the company for almost a decade before it started growing again. this is a legitimate risk and one that probably should be looked at because they are such dominant forces. as an investor, you have to own these companies for the long-term at this point. ask -- let's to

talk about tesla. askingion from a viewer for your estimates for the full year, for q4 and the full year of 2019. our estimates are pretty imprecise when it comes to tesla. obviously their business is changing so rapidly. we spec somewhere around $25 billion on revenue. 350,000 ev cars and at others.0,000 revenue will probably be around $25 billion. we hope and expect they will even or at a slight operating margin through the year as they invest heavily into their growth, especially in china. the opportunity is so enormous.

tesla needs to be investing in their growth right now to stay ahead of the competition, especially in china. emily: what do you make of the report that even the saudi investment fund has hedged their bets on tesla so they are not exposed if tesla doesn't do so hot? ross: the saudi investment fund is a joke, let's be real. they are not traditional owners like blackrock or somebody else. i think they're originally took their state to try to take the company private. they failed at that. they are very nervous as far as investing in things that will destroy their entire economy. saudi arabia has the most to lose with tesla success. so it doesn't surprise me that they are hedging their investment or this or that. there is a lot of motivation that is not economic. emily: what about the layoff at tesla, uncertainty if they can hit the same production numbers

from last year and a competition from other players in electric cars? we don't see competition in electric cars for tesla anytime soon. u.s. carmakers make horrendous cars and european carmakers are too busy trying to beat emissions testing and getting their ceos out of jail, versus building a large ability to cars.cture ev other companies are making good electric cars for china and the china market shows that, with more than a million electric cars sold. but they love tesla, it is a premium brand. the competition will help tesla. they will convince more drivers that this is a better alternative. a positive,at to be not a negative. on the layoffs, that is a

byproduct of the fact that tesla is trying to run their companies sustainably and profitably, not like a typical silicon valley startup that burns capital like they have been doing for years. the fact that they are showing financial discipline is something i am excited about. the purpose of the company is to use automation is much as possible in the production line. they struggle so much to get the production of to the level that would keep the company alive, they had to hire so many people. and streamlined production make the difficult choices that are a reality for tesla right --, the financial for financial situation for them is tight. from the effective larry ellison on the board, helping elon make the tough decisions that he did. we are seeing that with all kinds of tech companies across the board from apple and everywhere else. as we were about the future of

the economy under the trump administration. emily: it looks like facebook is not one of the big positions you have in tech companies. why not? peaked, ial media has think it is really bad for people. most people are spending less time, there is a screen time after that tells you you are spending three or four hours a day staring at pictures of your friends vacation or whatever. people have realized that. social media has morphed over to gaming now. all the kids are playing fortnight. they are having their social media there and they are done with the facebook inc.. those kids today don't even use facebook. they do use instagram. that is not bode well for facebook long-term. that was part of the decision-making as well. emily: we will talk more about

.aming later in the show quite a pronouncement that kids are done with the facebook inc.. we will be that with ross later in the show. if the currencies are off to a rough start in 2019. how is the decline affecting crypto startups? that is next. this is bloomberg. ♪

emily: bitcoins slump continues. it's slumped -- sunk to his lowest in more than a month, a disappointing start to the year for investors who hoped 2018 volatility was behind them. within $400 billion value was wiped out in the last year. is there any end in sight to this top? >> i haven't heard any good news about bitcoin or other cryptocurrencies at this point. boost themhat could

would be institutional investors suddenly wanted to get back into the game. last around this time we heard goldman sachs and barclays wanted to open up trading desks around this, which is something a lot of crypto traders were excited about. not only was it good to legitimize the cryptocurrency but it also meant it might bring more stability into the market. i guess it has brought some i don't know if it was necessarily the stability they were looking for at the time. emily: i have a chart that shows the cost to mine bitcoin is higher than the value of bitcoin, which kind of makes it a fruitless effort. the white line is bitcoin and the blue line the cost of electricity that it takes to actually mined the stuff. what is the impact of this? julie: this comes from a jpmorgan report that was out last week. this is an average.

there are some places where you could still mine bitcoin for less than the report shows. if you're in a place where , there'sty costs more much less incentive to continue doing that. another negative sentiment that is out there right now. emily: there is some hope for stable coins, but what is happening to all the digital startups that were founded based on the hope that this was going to be a huge market? it's not looking good right now. julie: i think a lot of them are waiting for water use cases and exploring that. use cases. the previous round had a valuation of 1.6 billion dollars. the new one was an $8 billion valuation, which was a massive jump.

based on people i was talking to during the fundraising talks, there was one point where it was as high as $12 billion. so you have seen that come back down. we talked about what their sales were in 2018, and while it was not broken out by quarter, they did increase from the year before. i would love to know what the actual quarter look like. i'm sure the bulk of that was back in the first couple of months of the year when it was trading around $18,000. will keep yourou finger on the bitcoin calls for us. coming up, nvidia fell the most in two months after cutting its outlook for fourth-quarter revenue. we will break it down, next. logitech reported strong results. what to expect from the company as it takes on gaming. this is bloomberg. ♪

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"activecore, how's my network?" "all sites are green." all of which helps you do more than your customers thought possible. comcast business. beyond fast. emily: this is bloomberg technology global link where we join bloomberg daybreak: asia really a. i'm emily chang. i want to take a look at the top global tech stories of the date first. shery: let's take a look at huawei because u.s. prosecutors filed criminal charges. part of a broad crackdown into the chinese smartphone maker. committing bank fraud of violating sanctions by doing business with iran. >> apple is planning a subscription service for games. the company began talks with

game developers in the second half of last year. it is not certain how much apple will charge for a subscription or what kind of games it will offer. shares of nvidia took a tumble in monday's session. the maker of graphic processors has cut its fourth-quarter revenue forecast. nvidia says gaming sales were below expectations due a weakening global economy, especially in china. those are the top global tech stories. emily? emily: thank you. i want to stick with nvidia and bring in rob gerber. you have a big position in an video, as we discussed. are you prepared for long-term pain here? rob: it feels like the pain already happened. we are down into the 135 range. i think the price clearly reflects the issues they are facing which are legitimate. emily: so, why do you think this

won't be longer-term then? rob: two things. one, do we get a resolution of trade issues with china which would sort of give investors as well as capital more confident in making investments and growing the chinese economy will be a lot easier if we can get through this. we do think the trump administration has manufactured this slowdown possibly, even the first chinese recession ever, who knows? we've created these problems for ourselves and issue is whether we will keep digging the hole deeper or solve them. i hope that we saw them, but i have little faith in the art of the deal so we are playing a pretty conservative right now. scenario, youse can solve the trade war with the short-term wins or whatever, but i think there will be no economist that will say china does not have structural growth problems of its own. down an economy coming

based on the pace of growth. that is undeniable. that market is something that is changing for suppliers and for companies like nvidia that have been used to the breakneck speed of demand. ross: there are a couple of things working behind the scenes. the banking shadow system they started a year ago by pulling back a lot of these sort of ridiculous lending things that were under the surface. this is one of the reasons the chinese economy has slowed because they have taken steps to actually make the economy more structurally sound through attacking these shadow banking systems. that is one of the reasons we are sleepin seeing the slowdown because there is less lending in things that will never make money. i think when you are china and look at the size of their fast thend havow average individual has grown income, this is the most

exciting market in the world. even 4%at 5% or 6% or is a reality for china over time as they mature, but these are still huge numbers and they will be the largest economy in the world in the next five, maybe less years. we have to accept that. but with this, i think there is tremendous opportunity in china and i don't think they are headed for some major collapse or anything. emily: that said -- to haidi's warned theimf has global economy is slowing down much faster than expected. how do you think ceos are going to react to this, even if they get some short-term relief? chinai think ultimately, has begun stimulating the market with different methods. china, they can do whatever they want. it is not like they have separation of powers and fed. the truth is that china can just

add more liquidity to the market if they want. they can do whatever they need to do to keep growth. ultimately, when you look at china as when upwardly mobile society and how advanced in technology they have become, how advanced their cities are today -- i have little fear that china will be successful in the future. once again, we are making investments right now into china, into some of the chinese companies that have come down in value because we think they are very dominant companies. i think this is a growing pain for china that was bound to come, but i think their leadership is very good and the people are very happy with it. i think it will be ok. optimisticare fairly a deal will be struck on trade. i'm curious whether that faith has been shaken given the development earlier today, the indictments against huawei. seen as an escalation before the

next round of trade talks. are you concerned? ross: once again, i don't agree with the trump administration's methods of negotiations which are basically heavy-handed. not a coincidental timing of these charges with huawei. i think i have little faith in the trump administration's ability to do a deal. what i have faith in is the need for both xi and trump to get a win here and stabilize both of our economies before we really see a global recession in the next year or two if this stuff does not get worked out. that is when people question the leadership not only in china, but also in the united states and we have an election year coming. i cannot imagine with an election year coming and how poorly the republicans have done that they are not pushing to resolve these issues, refocused back on growth and all the positive that can happen from

two of the major economies in the world working together. are they smart enough to do this? the chinese are smart enough to get it, but we are relying on what i consider very unintelligent people to represent us. i'm not confident. i think greed might overwhelm intelligence here. haidi: it is also a longer-term issue. legitimate concerns over security or whether it is part of a broader attempt to curtail chinese tech. is there a real concern it will be difficult for companies uawei to be and h doing business with the largest market in the world? ross: i think it is a new day for china. i think huawei is guilty for what they have been charged for. i think they have been abusing a lot of things for a long time -- technologies, theft. iran is certainly getting things from people and it is certainly china. i think it is great we are enforcing this.

i question the timing and the approach. it certainly has taken a dangerous approach to dealing with this issue, but i do think the way china has treated u.s. tech companies and the way they have hurt companies like amazon from being able to do business in china while they built up their own amazon, it is the same kind of game. if we are going to play the same game, they should expect that. this is part of the trade war and none of this ultimately works out good economically. maybe we can get a deal. once again, i am hopeful greed will outpace stupidity here. it is hope. i eight investing on hope. we are looking for opportunities when things get too cheap, like maybe nvidia. haidi: really appreciate your time, ross gerber joining us. thank you for your time. much more ahead so do stay with us. this is bloomberg. ♪

emily: dropbox has acquired -- $230 million in cash. it is an e-signature software company. the deal is expected to close of the quarter and dropbox says it will continue to operate independently. logitech beat third-quarter earnings estimates, attribute much of it success to the rise of e-sports. $864 million in sales last quarter, with a 23% jump in the gaming business. the company has attempted to hilersified its sales, w

mobile and cloud services gained popularity. producing $500 million in net sales in the last three quarters. the ceo joins us now to discuss. you actually took over this company at a critical point. and reprioritize gaming. why? >> i have three kids. all three of them were gamers. they were right in the strike zone. before i joined the company, my kids said logitech is a great company but their products are not as good as they used to be. when i joined, the immediate lisette where is the gaming group -- i immediately said where is beginning group? it was for people. emily: how many in the gaming group now? bracken: it would be well in the hundreds. emily: you still make the keyboards and mice and now making more of this equipment for gaming. controllers, headsets, speakers. bracken: right. gaming, in a way, the core business grouew 13%.

mice, keyboards and headsets is the same thing you see in gaming business but it is higher spec. increasingly wireless, high quality sensors and designed for gamers. it is that business but we also make things more console gaming which are headsets mostly today. we are getting into the controller business. we are also in simulation where you can feel like you are driving a real racecar. or if you are really adventurous, you can drive a farm sim. a simulator for farming. emily: how much does the company depend on the gaming industry and is that a concern given china's recent crackdown on gaming and the health of the global economy right now? bracken: when we first joined, we had four business groups. now we have 13. we are a lot more than just gaming. we are in gaming and it is in a sector of growth curve that will go on forever. it will be the biggest spectator sport within the next 20 years.

we are also big and video collaboration, videoconferencing. we make videoconferencing equipment for rooms of all sizes now. that is our third biggest business. the pc peripherals business is very strong. emily: what is the outlook for e-sports? bracken: e-sports is fantastic. what is happening in e-sports, for most people under the age of 25, they realize that almost everybody is either playing or watching at home. if you are over the age of 40, what is this e-sports thing? is it a craze? it is not a grace. they are playing more and more games, and they are playing them longer and they will grow up and their kids will play. emily: how was your strategy being impacted by the trade war and the concerns about the chinese economy? bracken: it does not even touch our strategy. it touches the tactics and operations in the way we bring things to market. we do a lot of manufacturing. we have a factory in china but we also manufacture in other

people's factories in china. are we will do -- we moving things into other factories, some of them outside of china. where we can, lowering costs overall. where we have to raise prices, we will. emily: what is the volume of manufacturing outside of china? bracken: relatively minimal because the total mri business is only 35%. in the u.s. is about 28. emily: if you need to raise prices, isn't that a concern for the business? bracken: we are generally the biggest player in the category so it gives us some power.everybody we compete with is in the same boat. emily: do the trade tensions have you thinking anything different about acquisitions? bracken: i was at a dinner the other night with other ceos and that question came up. np. o. i think it has dimmed the overall market in general and make people more conservative

which makes things more attractive from a pricing standpoint. we are still thinking about it. emily: some big consumer tech companies have been getting into consumer facing accessories like apple, facebook, google, amazon. is that a threat to your business? bracken: our general strategy and choice set is, we try to go into things that are really not important to them strategically. if they are in them, they are in to finish up and experience. it is not a threat, but it does shape the directions we go in. emily: ok, thank you so much for stopping by. good thing you have smart kids too. bracken: i did. o. emily: you use the lobby people for votes but now lobbying the eu on facebook's behalf. what changes are in store for facebook. still ahead, what are the expectations as apple gears up to released its quarterly

results and has the tech giant managed expectations? this is bloomberg. ♪

emily: as we prepare for facebook's fourth-quarter results wednesday, analysts are expecting your revenue surge according to data compiled by bloomberg. there was one corner of the facebook universe under the radar and that is the video platform, facebook watch. while facebook will taken close to double youtube's $4 billion is issales, watch single-digit percent. we have sarah frier who covers facebook for us. what is happening with facebook watch which made a big splash a

lot of questions about where it is been? sarah: one thing about facebook watch that in the beginning in 2016, it was more about creating a different way for people to use facebook. one of the things we will be hearing more about during earnings is how facebook has really reached a saturation point around the world in terms of global usage and its biggest ad market. watch was supposed to get people to use facebook in a lounge like experience like when you are on the couch watching netflix, maybe you want to watch facebook instead. so far, that has not happened. facebook watch is a minority of facebook users. it has not had a lot of big hits. the company is not getting to the point where they are competing head to head with youtube with the way they envisioned. emily: what is facebook saying about it? nick: facebook is saying they consider it a success. sarah: they know there is

consumer behavior to have this kind of intentional viewing experience, but they have not really gotten there yet. one thing that is very interesting that my sources told me about this whole thing is back in 2016 when this was conceived, facebook was taking an average of 45 minutes of user's time per day, but that was split up into little moments. less than 90 second sessions on average people were looking at facebook. it was these moments of the day that in aggregate turn into an amazing, global advertising business, but they don't have a lot of sit-down, intentional viewing. it is more passive. emily: with results coming up, despite all the bad news about facebook, analysts are expecting the biggest profit ever in a single quarter, right? sarah: facebook has so many options beyond facebook and watch. it is a tremendous business with the likes of instagram, facebook

messenger. starting to slowly monetize whatsapp too. most of the growth we will probably still see from the main facebook app which is continuing to grow in emerging markets despite the controversies in the u.s. what we will be wanting to see is whether those main market have really reached a saturation point in terms of users in the u.s., europe and other places. emily: nick clegg, the new head board,cy in comm is on u.k. former political figure. what will he bring to the table? sarah: the independent voice that facebook, telling them this is what will work, this is what will not work when you talk to regulators, the public. facebook has had a big problem with not understanding how the public views how they work and how they need to get better. so, maybe he will bridge the

gap, but so far it looks like he is out there touting the same solutions that zuckerberg has touted in the past, which is more independent oversight of facebook content policies and an expansion of the same tactics used around the 2018 midterm elections. emily: there is nick clegg in his former life as a u.k. politicker. snap in search of new executives. the cfo recently left. laura sweet, do you know her? sarah: she is one of the rising stars at snap. i know there has been a lot of turnaround at the top, so people can rise quite quickly. she is an interim option. they have said they are going to initiate a search. so, we still don't know who is going to be the long-term cfo at snap. tim stone was in the role for much less than a year.

it is going to be incumbent on them to find somebody who can stable approach with wall street. there has been a lot of volatility. emily: all right, i know you will keep us honest. thank you for stopping by. and apple reports tuesday. investors are well aware the initialwon't fit its revenue forecast. mark looks at how they went from darlings to downgrading. 2018, appleust became the first publicly traded u.s. company to top $1 trillion but a lot has happened since. in november, the company reported revenues beat estimates. apple forecast the strong growth for the holiday quarter, when presumably iphones, ipads and apple watches will be flying off the shelves. the iphone maker cfo quickly

announced the company would stop reporting how many iphones, ipads and macs it sold each quarter. some analysts thought something was amiss. they forecasted revenues for the holiday quarter between $89 billion and $93 billion. analysts' fears were proven right. tim cook announced the company was cutting its revenue forecast down to $84 billion. on tuesday, we will find out how accurate that production was when apple announces its final numbers for the fo quarter. apple blamed lower-than-expected iphone sales, particularly in china. it seems consumers who bought the iphone x for $1000 last year did not think an upgrade to the 10s was worth another $1000.the iphone x are did not support enough people looking for an upgrade. apple plans to turn that around. it is planning larger changes for the iphone this year, and even bigger changes by 2020.

there is also an augmented reality in the works. new software changes for the ipad coming. i'm mark gurman for bloomberg news los angeles. emily: mark gurman all over apple for us as always. that does it for this edition of bloomberg technology.tomorrow, we will have full analysis of apple's first quarter results. we will be talking to dan ives, and much more. we are live streaming on twitter. check us out. follow our global news network on twitter. this is bloomberg. ♪

haidi: good morning. australian markets have just opened for trade. shery: good evening from new york. sophie: i'm in hong kong. welcome to daybreak asia. ♪ the top stories this tuesday -- the u.s. charges dropped, further strained tensions ahead of trade talks in washington. asia-pacific markets under pressure as leading bellwethers deliver disappointment. caterpillar