♪ >> i am caroline in new york. this is "bloomberg technology." coming up, alexa. sales gains. it is the slowest fourth-quarter growth in three years. we will bring you highlights. intel remains a permanent ceo. a chipmaker hired from within. will it be the right call? investors turn bullish on

facebook. can the company officially moved past from the scandal? to our top story, amazon sales and earnings, a big estimate showing they can maintain 20% revenue growth well including profitability. advertising was at the key moneymaker. amazon's ability to charge brands for visibility to its 100 million plus loyal prime subscribers. joining us is an analyst at da davidson. darren baker, ceo of them shot which delivers official intelligence from the internet. great to have you both. at whaty, i am looking the earnings are speaking to you. can you give us a sense what you think of the fourth-quarter numbers and the first quarter

forecast? >> amazon has shown a great growth in the fourth quarter. their advertising business is skyrocketing. we have seen the growth of clicks grow from 3% in 2017, 6% this year, to 10% now. you can imagine the $3.5 billion business doubling to seven alien dollars a year quarter. we have also seen strong transaction volume. they are the dominant e-commerce player. we expect that to continue into the first quarter. buy rating.a do these numbers asante that? -- substantiate that? >> the fourth quarter is a continuation of a trend from the second and third quarter. you have to get used to the more profitable amazon. what is driving profitability is advertising and third-party unit sales, 52% versus 51%.

items sold on amazon by third parties utilizing the platform. their cloud computing efforts where revenue growth for aws was similar, the rate between the third and fourth quarter. i think you are seeing a more profitable in the growth engine of amazon advertising with a third-party unit sales. >> they are more profitable and have plenty of cash. the cash this company currently has. do you think they will push this -- put this cash to work in the right way? is about advertising or aws? they are outperforming and e-commerce. >> historically, you think of investment spending. we would hundred percent expect them to continue their pace of investment spending in addition to cloud computing. it looks like they could do more with physical stores. they talked about expanding the whole foods footprint.

we think amazon could do gas station's. theirntend to expand delivery network by having more physical whole foods stores. gas stations would do that to a greater degree. they can invest and proprietary , another important area. expect more investments for amazon across the board in a lot of growth drivers. wein interesting element is are seeing a plateau of growth when it comes to prime subscribers in the u.s. does this worry you? is it more or less time to focus on international growth? great point. they have to focus on that international growth. they invented e-commerce in the u.s. they have had to go into markets with entrenched competitors. a have to focus on international. another area where they need to focus our higher and private

label products. in terms of how they invest cash, they can go after higher and markets like apparel, clothing. there is plenty of competition out there. clearey throw aside competitors who have made it their business to dominate in how your luxurious sides of apparel? can amazon when that? a lot of the spending that goes on and amazon is less than their competitors. >> we have seen examples. we saw spikes on walmart.com during the holiday with the average price of a pot -- other product went from $39 to $53. if you are talking about where to invest cash, almost all of it is at the higher spend level. amazon naturally has to move in that direction. they have dominated the cheap goods market already. caroline: to the other part of

,he business that drives growth e-commerce and aws, amazon web services. 36% growth is phenomenal. are we expecting to see that continue? how are they changing the model? 'how are the seeing competition? there was worry that cloud spending was dialing back. >> the story for amazon pertaining to cloud computing with aws efforts is the pace of growth should decelerate. the question is, how quickly? it becomes a bigger effort for the company. was thenews for amazon fastest growing business was also the most profitable as it pertains to cloud computing. sustaine been able to the elevated growth rate despite

significant advancements from microsoft and google. cloud computing remains an important effort for amazon, a fast growing but slowly decelerating rate of pace but a huge profit driver. pres. trump: caroline: -- caroline: this is 12% of its overall revenue. how big should aws become compared to the rest of the business? -- comparing relative growth rates could be 20% of sales. that is why we believe amazon, 10 years from now, can have a consolidated margin in the 21% range. you will see margin expansion over the next 10 years driven by cloud computing efforts as well as advertising in third-party unit sales. caroline: you are both sounding optimistic. share prices have been wavering after hours. perhaps unsurprising giving the

rampart 30% higher. can you give us areas of concern you have for amazon going forward? what are key areas of competition or where they should focus the business? that is a great question. the risk is competitors have decided to take a strategy focus on a mission area. target is seeing 50% year-over-year growth in children's clothing but amazon is down 15%. 50% growth in food and personal care. for amazon's each competitor will pay a set of areas they are focused on. how does amazon not die? how will they compete on all of these friends in the e-commerce world at the same time? caroline: great way to say that. we thank you.

apple taking action on google apps. we will discuss the standoff next. this is bloomberg.

caroline: talking google. employees cannot -- can long number -- can no longer use apps built by apple. they set alphabet broke its rules. facebook violated the iphone makers development rules. we are here to break it down. apple wieldingt

its power in terms of user privacy. always cast itself better at privacy than google it does not because have an ad supported business model as the core way to make money. apple has some privacy red flags. at the end of the day, this is part of their narratives. this is a strong action they have taken against to huge tech companies platforms. it reminds us, apple is a powerful company. a reminder why they are wielding this power. apps, google and facebook both have programs that they would ask people to pay tom small amounts of money download apps to monitor the behavior of this people so they

can learn about how people use their services and the internet. this came out in the morning that facebook had done it and apple acted quickly. they made it impossible for facebook employees to use these versions that ran on ios. it ruined a lot of early versions of the apps they were trying to push to the consumers. it is disruptive. caroline: are these things being ironed out? facebook said they are taking this away. how can they make sure they cannot do this -- they can do this? >> google said they expected this to clear up soon. it has been 24 hours for facebook. we are not sure -- i am sure phone calls are flying back and forth. ceos are meeting with tim cook

to figure out what to do. we originally thought google would get a free pass. they apologized quickly when it was announced they did the same thing to facebook. they took down the research app. it looks like apple would not ask but now they have. caroline: they have not been paying teenagers, it seems. >> google's perspective feels it is technical. they were not asking for as much data as facebook was. the teenagers were a small part, less than 5%. >> can this get wider? >> it is hard to say. about -- it is a very technical thing coming to research and programs. people are concerned about these things.

these programs that have been out and people were not concerned about them, people pay for data here and there. when you pass them in a new light of privacy and data and responsibility, they suddenly sound like a big deal and can result in hefty action. caroline: it is great to get your opinion. coming up, the search is over for intel. after months of saying no, the ceo is now full-time. we will look at the challenges he is facing. this is bloomberg.

♪ >> i love my day job. i am excited for the progress the board is making. that was july of last year when he was intel's acting ceo reminding us that while he

, there report cfo saying he did not want the top job at it seems he has changed his mind. on thursday, bob swan was named the ceo. heart? change of about thispoke earlier, he said, i love my job and i wanted to make intel a better place but the more i did the job, the more i took over talking to customers, dealing with interactions, the more i understood about how pervasive we are in the industry. when the board asked, i cannot refuse. caroline: the market initially was mixed. shares fell. they retraced the loss. there was hope they may be would ceoa slightly more female but maybe a more external candidate? >> you are right.

when the former ceo was forced out, people thought bob swan would be a good interim candidate. on and bobragged said i do not want to do this, people started looking in other directions. going back to the person we thought was going to get it, it is a sense of, what happened? there was a little bit of disappointment. key focus of bob swan to prove himself is to take on competition. we have great quotes coming from him discussing how he will double down on services and customers. : we believe we need to continue to provide real differentiated service for our , not just temporary

financial results, but to increase the wide gap between us and competitors in which we compete with the market. bybring technology to life having systems on the shelf in the holiday season of 2019. caroline: how hard is the competitive landscape right now? >> that is a good question. looking at the numbers, you think, what is the problem? looking behind the scenes with manufacturing of technology in the semiconductor industry, it is not looking as good. intel is late on the latest manufacturing trends. next 12 or 18 months, it will face more competition than it has. caroline: what companies should we watch that are biting on their heels when it comes to new

innovations? amd.vious candidates are they appear to have resurrected its portion -- it's fortune. what is potentially more damaging our customers for amazon, aws, microsoft, they are looking at their own designs for chips were intel makes money. that is a huge threat. they are outsourcing production which is leading in terms of manufacturing. caroline: what do you think bob swan's next move is? is it about building a team around him are going out for customers and clients ensuring they are ahead of the curve able to persuade those to stop building their own? >> that is a good question. i think people are unsure about this. he is not from a technical

background. he is from a finance background. intel's problems as being a technology problem and want technological answers, particularly to the answer of manufacturing keep -- manufacturing. it set the pace of the industry. caroline: we thank you for joining us. we have been talking about one executive change. tesla is losing another executive. wednesday thealed cfo is retiring for a second time. the companies saw a series of departures last year. joining us from san francisco is donna hall. we saw him continue -- the tiger once before. -- the tiger once before. how disruptive is this? >> the market reaction was not good.

this was at the end of the earnings call, one more thing. you saw the shares dropped 5%. they have not really recovered. he is retiring. he retired once before. it is not a huge surprise. there were a lot of executive departures and we helped we put that behind us. this hit investors as a surprise. caroline: also maybe some of the conspiracy theories start to evolve more. this is a company focused on production but also on cost-cutting. they just lost their chief. has been at tesla for nine years. he is a protege of at the cfo. elon musk trust him. he was on the call yesterday. tesla is trying to position this as we have continuity. he has been part of the finance

team -- pharmasset decade. they are saying this is not necessarily a negative. the businesss how works and has been involved in the operations for quite some time. caroline: remind us how class flow is looking -- cash flow is looking. they had profitability bringing in positive cash flow. how hopeful are investors that this can be sustained? tesla made profitability two quarters in a row back to back. that is huge for them. talked about the risk of a recession and how tesla would manage with a focus on reducing cost. they are greeting for macroeconomic forces beyond their control. the question for 2019 is demand.

what is the demand for the model three and when can they get the $35,000 of the car out? caroline: they were warning potentially sales in the u.s. for the model three would suffer in the coming quarter as they look further upfield, going global. >> they're focused in the first quarter is a shipping cars to europe and china. they do not want vehicles in transit at the end of the quarter. january and february are typically soft for the auto market. most people do not buy cars during the middle of a blizzard or polar vortex. the first quarter is likely to be lumpy. caroline: we always talk about the bull versus the bear. he was winning? -- who is winning? >> it is a mixed bag. good news, tesla has $920 million in debt due march 1. they said they will service this

with cash on hand. the market reaction is it the earnings report was relatively flat. they announced the cfo was leaving and it dropped 5%. it recovered a little bit. caroline: great reporting. we thank you for joining us. much more coming up when it comes to earnings. we monitor amazon's earnings release. and marketing expenses spiked in the fourth quarter, shares are essentially flat in after-hours trading. this is bloomberg.

>> this is "bloomberg technology " global link. let's take a look at the top global tech stories today. up itscomm is ramping patent fight with apple. the company has asked the court iphoneany for a ban on sales there. the companies are fighting over licensing fees qualcomm charges forms technology. apple says the company unfairly leverages its position as the biggest provider of chips to

smartphones. nintendo beat estimates thanks to strong holiday demand for super smash brothers and pokemon , but slower sales of its switch console forced the japanese company to cut its sales outlook projections. theon reported earnings for second consecutive quarter coming in below wall street expectations and raising concerns some of the markets amazon used to catapult itself into a juggernaut might be cooling off. the company says it is evaluating the impact of new e-commerce rules in india. those are the top global tech stories of the day. >> president trump met with china's vice trade premiere in the oval office on thursday saying he received a beautiful letter from chinese president xi supposedly says he hopes the leaders keep in close contact. president trump said there is no

meeting date set as of yet. the u.s. is also dispatching to of its top trade negotiators to china. joining us from hong kong to discuss is bloomberg's chief north asia correspondent. we are hearing from the ambassador saying the chip to china with secretary mnuchin may around mid-february. what is interesting is what shape a trade deal could take. president trump has talked about no deal if it is not a big deal and that it could actually get postponed. what do we know so far? >> that is right. it was interesting to hear from that ovalhthizer in office in prompt a press conference where he said they really focused on structural issues. buying soybeans and buying lng, buying more commodities from the united states, that is the easy stuff. china needs those commodities and they were planning to do

that anyway. they stop buying soybeans as a .etaliatory measure but it is the structural issues that robert lighthizer talked about and that is the theft of intellectual property by the chinese, allegedly of course, that the united states alleges as well as the state support of key industries and forced technology transfer. these are the key issues. keep in mind -- negotiations have gone back and forth with one stepress, maybe forward, a step back, etc. i'm not supposed to give my opinion, but i have always been pessimistic they will get a lot of progress run the chinese on these key structural issues and that perhaps any kind of deal could be a band-aid to buy more u.s. products, whereas the key negotiations with just a month left to go until that march 1 deadline, there is a lot of optimism but also a lot of

challenges to get those structural issues adequately addressed. a notableighs are china hawk saying enforcement, enforcement, enforcement. clearly they want these things to become a reality. i was also interested from a tech perspective. huawei as yet has not really been discussed, but it will be. >> yes, it will be. donald trump sort of dismissed the case saying we will talk about it. we have not talked about it yet and this is a small component of the overall trade relationship between china and the united states, but it has sort of between chinad and the united, with the third country being canada. it goes back to allegations of intellectual property theft. we will see where those negotiations go and if that could potentially derail any kind of structural deal we might

see before march 1. >> what is interesting is that the u.s. trade representative has really been hammering the point that we need a viable and enforceable deal. we heard from ambassador lighthizer again today. verse take a listen. do if wee much work to are going to have substantial progress. we focus on the most important issues, which are the structural , intellectual property protection, agricultural services issues, and enforcement, enforcement, enforcement. both sides agree that this agreement is worth nothing without enforcement. >> does this complicate any potential progress between the two? >> it always does, of course. implementation of every promise coming from the chinese has always been their biggest challenge.

wto commitments they made as well as the different draft laws going through the chinese legal system on intellectual property rights. we are hearing there are new putonwide draft laws being at least into the working level. they have not been implement it, but again, implementation and enforcement have always been the biggest challenge for the chinese. >> of course, what is interesting about who has got the power play at the moment. we are seeing the u.s. stock market almost completely recover from its selloff. talk to us about the pressures on the economy and indeed stocks in china and some of the collateral damage we have seen wreaked by the trade war. >> just look in the regular headlines that we cover every single day. the largest semiconductor foundry in the world -- yes, it is taiwanese, but a lot of its business is in china and 1/4 of its sales are tied to apple, who made that warning about the chinese consumer and their products being sold there.

samsung yesterday had its , slashing for a second consecutive year, but then you have these chinese manufacturers talking about moving their production base or at least some of their production to places like indonesia, vietnam, even india. foxconn is talking about investing $200 million in indonesia, in vietnam. supplier talking about it. 15 of the top 20 exporters from china to the united states were taiwan-originated companies or affiliates and they can pick up and move their production bases a lot quicker and easier than chinese domestic manufacturers, so that could be significant collateral damage on the chinese economy.

perspective, as always. thank you for joining us. much more ahead, of course, on bloomberg. we will be digging into amazon numbers of little bit more when we come back. ♪

>> facebook goes on the offense. the social networking giant reported earnings that topped .nalyst expectations emily chang spoke with facebook coo sheryl sandberg wednesday after the company posted results from menlo, california. the conversation focused on company performance in the last quarter. >> we had a strong quarter, and i think it was an end to an important, challenging year. growth is across the board. we now have two point 7 billion people using at least one of our

services every month. that's facebook, instagram, whatsapp, messenger. really importantly, facebook is growing. now 2.3 billion users on a monthly basis with 66% coming back every day. i think where the questions people have about us right now bige are making such investments in safety and security. we have so much work to do to protect people on our platforms. ourwe do that while growing community and while building our business? i think this quarter shows we can do both. we still had a lot of hard work to do across the board, but i think we are making progress. incidentere was an where via was revealed facebook had a tool that was collecting data from users including teenagers in exchange or payment. apple has shut down your internal app and our sources tell us that employees are panicking. how are you triaging this?

clear want to be really what this was a this was an app called the facebook research app . there was nothing secret about it. inticipants knew they were it. a great majority were adults not who agreed to participate in market research. apple took it down. it was violating the terms and that is something we obviously never want to do and we are working with them on employee certificates, but i think it has been a pretty productive day at facebook would people are continuing to do good work. that said, for a lot of people, "not again"rt of moment. what do you have your in terms of why people should trust they spoke? >> again, i want to be clear what this is. what matters is that people know how their information is used, and in this particular case, the people using the research app in the study new they were in it and how their research was being

used, but you are right and it has been a challenging time for facebook and we need to and backed people's trust with the steps we take. one of the things you saw in our quarter was how much we are investing in safety and security and you know this. if you want to see what i company cares about, look where it spends its money. our expenses are massively up the cause we want to take the hard steps to protect people on the platform. you see what happens with elections, u.s. midterms and around the world, fake accounts. these are hard and ongoing problems, but we are determined to do the hard work and keep doing it. emily: the ftc has been investigating facebook privacy practices. we have reported they are preparing for a record fine. what are you preparing for? >> we are working closely with the ftc and regulators around the world. what we are working for us to continue to make the investments in safety and security. on our earnings call, mark said

it was a top priority for the country. we have a lot of work to do but we are making really good progress in a lot of areas and we will continue to work hard. we are also continuing to build great products. i think this quarter shows that people are continuing to use facebook and our different products around the world and we will also continue to make important investments. one of the things i am proud of is where making massive investments in and also renewable energy. by next year, we will be 100% renewable in all of our operations including all our data centers. we will continue to make investments across the board. broadly, you have said revenue growth will slow down. you have promised to make changes, promised to fix the problems people perceive. you say you welcome regulation. how you convince investors that facebook will also continue to grow rapidly with all of that as well? >> our numbers are public and we still a very fast growing

company by any stretch and we will continue to make the investments to prevent harm, to build great products people want to use, and invest in our future , so our focus is continuing to do all of that, and i think people wonder if we can do it all at once, and i think this quarter shows that we can and we will. >> mark said on the call he wants to decentralize power. we know that you are working on merging the back ends of messenger, whatsapp, and instagram. there's a concern that privacy will be compromised in that process. why do that? >> so we know what people want from messaging. they want messaging that is simple, reliable, and privacy safe. we are working on ways to make it easier to find your friends and family throughout the network, but in all of that as we do it, we will make very careful decisions with people's privacy and communicate clearly and these are very early

conversations with a lot of hard work to do. >> let's continue the conversation on facebook. isning us now to discuss sarah frier. talking much about their focus on privacy but also on the fact that this is still a very fast growing company, why our customers, companies, advertisers, and indeed, you and i, users, not liang amid the controversy? >> first, i want to get to some breaking news. facebook just told me their enterprise certificate with apple has been reinstated, so the problems over the last couple of days of using their internal ios app, the development of that, the standstill that has been created at ace book over the last couple of days has been resolved. to answer your question, this is a company that has a dramatic power over our world right now.

there size is 2.7 billion users across all of the different properties facebook owns and there are not really a lot of other places advertisers can go for that kind of network of information and there are not a lot of places users can go to withhat kind of networkthere their friends and family. though we have seen a lot of criticism of facebook and how they have gotten to this point, there is no denying that they are incredibly powerful and incredibly good at making money. suisse mentioning switching from playing defense to offense. do you think the company will be able to continue to show this sort of growth going forward? is there optimism now with backn san francisco? >> there was a lot of concern ahead of the earnings report that there might be some saturation in markets like the u.s. and europe where the most lucrative advertisers are. this report shows they were still able to grow in those markets, but if you look to the future, they have said that their revenue growth is going to

slow and they have said that they are going to stop reporting use justusers facebook. they are going to start to only report that aggregate number that includes instagram and whatsapp and messenger, which sort of hints at how they feel 's coreybe facebook growth will not be as stable. >> interestingly, some analysts aestioning if we will see focus on better systems put in place by facebook going forward. we heard talking the talk from sheryl sandberg that they are focusing on privacy and transparency. if the systems are there yet was something raised by bank of america/merrill lynch. we had more news that they do seem to be coming to grips with their overall facebook product and other news basis, the sum coming from iran. >> we have heard that they have arise out ofoblems

people in iran trying to manipulate political conversations around the world accounts. basically, they are impersonating people in very countries and then using that to manipulate the conversation, sharing what iranian government media has been saying, so we do not know that these accounts are from the iranian government, but we do know they are spreading the same messages. that is concerning, but the bright spot in this particular set of news is that facebook found that through collaboration so there has been some collaboration among industry rivals to try to solve some of these societal problems that their platforms have wrought. >> i think we unfortunately cannot listen to some of the sound we were going to bring you from the coordination of cybersecurity. just to reinforce, that breaking news you brought to us at the

whatning -- it seems to us facebook isng is now reinstated with apple. this is some concern to investors. >> this was a concern because facebook was unable to test some of its internal apps. they were not able to use the internal versions, the beta versions of instagram, messenger, facebook, etc., and they were also not able to use their internal app for transit and booking rooms. the company runs on these internal apps, so it has been a difficult 24 hours at a's book, but i just heard from a spokesperson that all is resolved with those enterprise certificate and they are able to get those apps back online. >> wonderful. always great to get your breaking news and analysis. coming up, we discuss the 'sggest takeaways of amazon earnings results. the ceo weighing in on the

company's recent performance. >> we feel good about growth in the quarter. we think q4 in particular was a great quarter for customers, there is strength in the retail part of the businesses, that teams have done a good job preparing and executing on the quarter. remit -- maintained a strong growth rate and continued to deliver for customers. ♪

much uncertainty as to what the impact of the government rule change is going to have on the sector. we remain committed to complying with laws and regulations and we will, but we are evaluating the situation. our main issue and our main concern is trying to mitigate the impact to customers and sellers in india. >> amazon's cfo discussing earnings. let's get more analysis from san francisco right now. what were your key takeaways at the >> if you look at the quarter, everything was fine.

obviously, the prophet the showed the demand. no word about wages hampering profits or anything like that, so they seem to be managing well, but what should people was the revenue growth expectations for the first quarter which we think are pretty light. we think there are pretty basic reasons behind that, one being currency. the second being the subscription services revenues sought a material slowdown. part of it was an accounting change. we think the slowdown you see is mostly because growth coming outside developed countries were -- where prices for these services is much lower. you are seeing a combination of those things, but the profit guidance suggests that despite

expectations, that expenses are going to rise this year. they are able to manage it because of aws and advertising. >> i'm looking at how expenses have been surging, particularly in the fourth quarter. there is a great chart showing how they are flashing that cash more. talk to us about the areas of profitability, the fact they are raking it in from advertising. amazon web services, 46% growth in the fourth quarter, but not that much of the overall business when it comes to actual revenue. a yes, it will continue to be profit driver. like you said, aws, advertising, those are the prophet offsets. things have an impact on revenue, especially when they move, because they only book a small portion of what they sell as revenue.

offsetsm to have enough to plan for spending that will come online this year, so they are expanding shipping. you will see more push into advertising, aws infrastructure, so there is worry that spending might accelerate again, and it definitely will, but the way they manage it with offsets for advertising and aws is what is going to decide the profit growth trajectory. we feel more comfortable with the profit growth here than the revenue growth for this year. >> not often you hear that coming from the likes of amazon which has always been a revenue generator if not a profit generator. >> it has been a change of story there for sure. the 20% growth in number for this year, but profit growth could be potentially good. get your great to analysis. we thank you. that does it for this edition of

"bloomberg technology." tune in friday when we speak to .he coo of mozilla the company heads to court over their appeal -- over the repeal of net neutrality. this is bloomberg. ♪

>> a very good morning. i'm live in sydney where it stocks of just open for trade. asia." me to "daybreak our top stories this friday -- u.s. stocks rallied to cap their biggest monthly gain in three years. investors like in corporate earnings and the fed's dovish tilt. mark is also watching -- watching