♪ >> this is the best of bloomberg technology where we bring you the best interviews in tech. coming up, apple, with tess lawn, facebook. it's been a big week for tech results. we'll have the industry's reaction. facebook talking about its resultses and speak to the c.e.o. how the company is trying to move past the scandals and controversies. and intel names a permanent c.e.o. after searching.

why the chipmaker hired from within and will it be the right call in the long term? first to our top story, facebook goes on the offense. the social networking giant reported revenue that blew past analyst expectations if the recent deluge of pad press is hurting anything, it's not the numbers. facebook has a tough road ahead to win back trust. i spoke to cheryl sandberg after they posted the results in california. we begin with focusing on the company's performance in the last quarter. >> we had a strong quarter and think it was the end to a really important, challenging year for facebook. the growth is across the board. if you look at it, we have 2.47 billion using one of our services every month, and hat's facebook, instagram, what's app, messenger. face book is growing and we have 2.3 billion on a monthly basis with 66% coming back

every day. i think one of the questions people have about us right now is we're making such big investments in safety and security. we have so much work to do to protect people on our platform. can we do that while growing our community and while building our business? and i think this quarter shows we can do both. now, we still have a lot of hard work to do across the board but i think we're making progress. >> there was an incident in the last 24 hours whereby it was revealed facebook had a tool that was collecting data from users, including teenagers, in exchange for payment. apple has shut down your internal apps and our sources are telling us that employees are panicking. how are you triaging this? sheryl: i want to be really clear what this was. this was a app called the facebook research app. despite earlier reports there was nothing secret about it. participants knew they were in. a great majority of people were

adults and not teens. people were compensated for being part of market research. >> even apple punished you. sheryl: we've taken it out of the app store and have taken it down and we were violating its terms and something we didn't want to do and working with them on the employee certificates but it's been a pretty productive day at facebook where people are continuing to do good work. >> that said for a lot of people this is a sort of not again moment. so what do you have to say in terms of why should people trust you? why should people trust facebook? sheryl: again, i want to be clear what this is because what matter is how people know how their information is being used. in this particular case, the people using the research app in the study knew they were in it and knew how their information was being used. you're right, it has been a challenging time for facebook and we need to earn back people's trust with the steps we take. i think one of the things you saw in our quarter is how much we're investing in safety and security. you know this, if you want to look at what a company cares

about, look where it spends its money. our expenses are massively up. we've changed our profitability because we want to take the hard steps to protect people on the platform. you see us doing that. you see what happens with elections and the u.s. midterms and around the world, fake and nts -- accounts, looking at fake news and we're doing hard work. >> >> facebook practices are being looked at and preparing for a record fine. what are you preparing for? sheryl: we're working closely with f.t.c. and we're preparing to continue to make the investments in safety and security. in our earnings call mark said it was the top priority for our the company. we'll continue. we have a lot of work to do but are making really good progress in a lot of areas and we'll continue to work hard. we're also continuing to build great products. i think what the quarter shows

is 350e78 are continuing to use facebook and the different products around the world and we'll continue to make important investments. one of the things we're proud of we're making massive investments in capex and renewable energies. next year we'll be 100% renewable in all our operations including all our data centers. we'll continue to make investments across the board. >> more broadly, c.f.o. dave weiner said revenue growth will slow down and you promise to make changes and promise to fix the problems people perceive you said you welcome regulation. how do you convince investors facebook will continue to grow rapidly with all of that as well? sheryl: our numbers are public and we still are a very fast growing company by any stretch and we're going to continue to make the investments to prevent harm and build great products people want to use and invest in the future with things like v.r. and a.r.

our focus to do continue doing that. people wonder if we can do it all at once and this quarter shows we can and we will. >> mark said on a call he wants to decentralize power and we know you're working on merging the back ends of messenger, whatsapp and instagram and there are concerns privacy will be compromised in that process. why do that? sheryl: we know what people want from messeninging and our focus is what people want and they want messeninging simple, reliable and privacy safe. we're working on ways as mark said, to make it easier to find your friend and family throughout the network but in all of that as we do it, we're going to make very, very careful decisions with people's privacy and communicate clearly and these are very early conversations and a lot of hard work to do. >> my conversation with facebook c.o.o. sheryl sandberg. intel has officially named bob swan as the seventh c.e.o.,

filling the most prominent role in the semiconductor industry at a time opponents are challenging the company's 30 years of market dominance and ends a month long search where swan claimed several times he didn't want the top job. our caroline hyde caught up with king about the decision thursday. >> when i spoke to him earlier, he said i love my job and wanted to make intel a better place but the more i did the job the more i took over, talking to customers, dealing with those interactions and the more i understood how pervasive we are in the industry and the more it became an interesting thing and when the board said, would you do it, he said i couldn't previous. that was his explanation. carol join, the market was mixed about this, shares fell and they managed to retrace the loss and why the disappointment, there was hope maybe you'd get a slightly more, for more of a better word, female c.e.o. at one point but maybe a more external

candidate. ian: you're exactly right and when the previous successor was forced out, people immediately thought bob swan would be a interim good candidate but as things dragged on as bob said more and more i really don't want to do this, people looked in other directions and assumed their board was doing so. then when we go back after seven months to the person we all thought was going to get it, then it's a sense of oh, w really, what went wrong in the interim and what happened and there was a bit of disappointment. caroline: a bit of disappointment and now the key for swan to prove himself is take on some of the competition. thanks to you we have great quotes coming from him, really discussing how he'll double down on services and customers. take a listen. bob: we believe we need to continue to provide on different -- or real different services for our customers and not just have great financial

results but to increase the wide gap between us and the competitors in which we compete within the market. secondly, to bring technology to life by having systems on the shelves of the holiday season of 2019. caroline: just how hard is the com me at this time -- competitive landscape for intel? ian: that's a good question because you look at the numbers and think what's the problem? but you look behind the scenes with manufacturing technology which is extremely important in the semiconductor industry and something intel has been leading for decades, it's not looking quite as good. intel is years late on the latest manufacturing notes, something which other companies appear to have got to first. so arguably over the next 12-18 months or so, it will face more competition than it has done a very long time. caroline: which ones are the ones to watch when biting on

intel when it comes on the new innovations intel has been slow to pick up on? ian: the office canada dead would be a.m.d. and they appear to have resurrected its fortunes and become a credible supplier again. really what's potentially more damaging for intel, customers such as amazon, a.w.s., microsoft, they're looking at their own chips and designs for these data centers where intel makes so much money, that really has got to be a huge threat and outsourcing their production to tmac which is leading in manufacturing right now. caroline: that was blerpg's ian king. coming up, tech earnings season in full swing and discuss customer demand at amazon over the crucial holiday season. if you like us, listen on the bloomberg app, bloomberg.com and on sirius x.m. this is bloomberg.

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>> it's opinion a big week for tech results. amazon reported fourth quarter results giving insights to sales over the holiday period. tom and david talked with caroline hyde thursday to get their reaction. >> i think amazon obviously has shown great growth in the fourth quarter. as you mentioned the advertising business is skyrocketing. we've seen the growth of sponsored clicks grow from 3% in january of 2017 to 6% january this year to 10% now and you can easily imagine that $3.5 billion a quarter business doubling to a $7 billion quarter business. we've also seen really strong transaction volume. they are still the dominant e commerce player in the fourth quarter and we expect it to continue in the first quarter of this year. caroline: tom, your perspective, you have a birating, do these numbers

substantiate that? >> absolutely. i think the fourth quarter is a continuation of the trend from the second and third quarter to the extent you have to get used to the more profitable amazon and what's driving that profitability is not only advertising but third party union sales which was 52% versus 51% so the items sold on amazon by third parties utilizing its platform which is very profitable and also their computing effort where the revenue growth for a.w.f. is similar from the rate from the third and fourth quarter. i do think you're seeing a more profitable and the growth engine of amazon being cloud computing and advertising and third party unit sales. >> to thatent they're more profitable with more cash and looking at the sheer cash hold this company has, where do you think they put the cash to work in the best way, where do they double down and is it about the advertising area of growth or more about a.w.s. because they're clearly outperforming e

commerce? tom: clearly when you think of amazon you think of investment spending as pertains to using the cash, we 100% expect them to continue their high pace of investment spending in addition to cloud computing it looks like they may do more with physical stores and talked about expanding the whole foods physical store footprint and we think amazon could do gas stations and what they intend to do with whole foods is expand their delivery network by having more physical whole food stores and the gas stations would do that to a greater degree and they could invest in proprietary content which is another important area for amazon. expect more investments for amazon across the board in a lot of their growth drivers. caroline: interesting element here, deren, we're seeing a platform of growth when it comes to prime subscribers in the united states, does it worry you in any way, is it more a time to focus on

international growth? deren: that's a great point. amazon has to focus on the international growth. they basically invented e commerce in the u.s. and when they've grown internationally they've had to go in markets with entrenched competitors and they really do have to focus on international. i also would say another area they need to focus on are a lot of their higher end private label products. in terms of how they invest their cash they can go in higher end markets like apparel, clothing, things like that both internationally and n the u.s. caroline: there's plenty of competition, can they throw aside the far fetchers of this world and there are clear competitors who made it their business to dominate in the luxurious side of apparel, can amazon win there because as jump shot shows a lot of the spending going on in amazon is a lot less than competitors? deren: we've seen numerous examples. there were spikes on wal-mart.com in the holiday

season where the average price sold went it from $39 to 53 and amazon stayed flat but you talk about where to invest the cash and where the competitors are making investment,, almost all of it is at the higher spend level and amazon has to move in that direction because they've dominated the cheap goods market already. caroline: i want to go to the other part of the business that drives growth, you've been talking e commerce and a.w.s., amazon web services, 40% growth is phenomenal that they can sustain this sort of growth. are we expecting to see that continue, and really how are they changing up the model, how are they seeing the competition when we have got also microsoft making inroads and there was worry cloud spending was dialing back a little bit. tom: i definitely think the story for amazon as it pertains to cloud computing with their a.w.s. effort is the pace of growth should decelerate. the question is how quickly as it becomes a bigger effort for the company as far as total

revenue generated. the good news for amazon and what drove the share price the last 12 months is its fastest growing business us also the most profitable business as it pertains to cloud computing. the good news i think to your point though is they've been able to sustain this elevated growth rate despite significant advancements from microsoft and google. i do think cloud computing remains a very important effort for amazon, a fast growing, though a slowly decelerating rate of pace but also a huge profit driver as well. caroline: it's 1% or thereabouts of its overall revenue, how big does a.w.s. become compared to the rest of the business? tom: when you compare the relative growth rates 10 years from now, it could be 25% of sales. and if you look at it on that basis, that's why we believe amazon 10 years from now can have a consolidated margin in the 21% range. we do think you'll see more

margin expansion in amazon over the next 10 years really driven by their cloud computing efforts as well as advertising and third party unit sales, also. >> that was tom forth aye, d.a. davidson analyst and darren baker, c.e.o. of jump shot. coming up, the u.s. rams up its talks with mawei and how did is it impact prospects of a deal? iphone sales slow down at apple with a massive revenue drop in china but tim cook on wearable services and bring you the results on fourth quarter results. this is bloomberg.

>> the u.s. has hit china's largest tech company with a string of charges ranging from i.p. theft to fraud. the indictments against huawei come ahead of crucial trade talks in washington. huawei reacted to the charges

by stating the company denies it or its subsidiary or affiliate violated any violations of the u.s. law set forth in each of the indictments and is not aware of any wrongdoing and believes the u.s. courts will reach the same along. that's meng, the huawei c.f.o. huawei and the u.s. affiliate are set to appear in court february 28 in seattle to face charges the company engaged in a scheme to steal trade secrets from t-mobile. our bloomberg tech global executive editor tom giles joined us tuesday to discuss. tom: the timing is everything, right, and getting these charges to come down just as the trade negotiations heat up. there are two schools of thought. one of them is this gives u.s. leverage, right? it shows we're serious and gives us some kind of negotiating chip against china. there's another school of thought and we spoke on bloomberg tv yesterday to a former u.s. trade official who said this undermines the u.s.

case. this has the potential to show that china -- show china we're not serious about either side, either the trade issue or the case against huawei because why would we use one as a bargaining chip against the other? in some ways it undermines our case to show well, we're willing to make concessions on this side of things in order to get what we want here. then how serious were you about this side of things in the first place if you're really just going to use it as a negotiating chip? again, it's a different school of thought. it could go either way as far as u.s.-china is concerned. >> the u.s. has formally requested -- tom: extradition. >> meng from canada to the united states. what's the process? tom: canada has 30 days to assess whether to honor this request. it's a very interesting thing, a very interesting political situation canada is left in. canada is paying a high price o be the u.s. ally here.

they've had canadian nationals arrested in china seemingly as a result of letry rereretribution for canada's role here. it's not working to canada's advantage. you also have to take into consideration this question of countries around the world, including canada want -- and the u.s., by the way, want to build out 5-g networks and the fact of the matter is a lot of telecom companies say huawei is selling good equipment at a low price, why can't we buy it? there's all this political pressure by the u.s. against using huawei as a result of the retention. >> your team has so many stories out on every angle of had huawei story, the u.s. message to the world, don't trust china on 5-g. how will others receive this message? tom: they've got a way, as i said, your desire to use huawei's lower priced and arguably reliable equipment when it comes to 5-g and this

assertion by the u.s. government that china can create a -- excuse me, huawei can create a backdoor to china, that this represents a potential security threat for your country, your sensitive trade secrets, possibly your national security. that's a tradeoff that a country has to make. do i want this equipment or do i want the potential for backdoor? where we see the u.s. needing to be more forthcoming possibly is to show more of why huawei is a threat. it's one thing, yes, they're stealing i.p. allegedly. yes, they're violating u.s. trade sanctions but are they a real threat to national security in terms of creating a backdoor for china? are they saying to china's government, come on in and listen to these conversations between the u.s. and its allies? that's an open question. >> still don't have evidence of that. i want to tie it pack to apple earnings. huawei is a big competitor to apple in china and they're not

seeing their market share fall like apple is in china specifically and they're at an interesting and perhaps advantageous position because apple has to outsource its chips, intel, qualcomm, where as huawei makes its own. that's another part of huawei's business. how is huawei's business going to fare amidst this onslaught to the 5-g side? tom: it is an important part of their business. we spent time with huawei in its labs and in its factories in china and the message they're trying to send is that we're more than just about telecom equipment, telecom networking gear. we're moving into new areas. we're moving into places like, you know, the internet of things. a.i. they're definitely trying to send the signal to the world that we have other businesses that we can rely on. we also did this story about the fact that, you know, their chips are in a lot of security cameras around the world.

they're everywhere. there are other businesses. and they have, as you said, a mobile phone business that's doing very well in china despite the slowdown. the slowdown is real and it's hurting many companies, not just apple. where huawei has an advantage, though, is it prices its products at a lower price point, something apple failed to do. and that really hurt apple in the most recent quarter and we'll see what apple starts to do with its pricing to get around that. another advantage for huawei in china is local companies, we've heard, are telling their employees, buy because way, buy local, don't buy the iphone. let's see if that's taking a toll and if the toll continues into 2019. >> that was bloomberg's tom giles. coming up, we are more than the iphone. that's apple's message to investors, more on where tim cook is focusing growthers next. bloomberg technology streaming

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simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today. >> emily: welcome back. apple posted the first report since c.e.o. tim cook informed investors apple was cutting their forecast and posted revenue higher than expected at $83.4 billion. the number we were rating for was china revenue, a steep dropoff in sales in greater china. apple brought in almost $5 billion less revenue in china in the holiday quarter than a year earlier. web bush securities director dan ifes and horace duke, founder of the market intelligent site of system co-joined us after the earnings came out tuesday. >> we've seen a couple

macroindicators collapsing in the last two months of the quarter, november, december, consumption tax, v.a.t. tax, all down dramatically. apple was up 16% until q-3 last year. so we went from going up to going down 17% year on year so there was a dramatic collapse in china and not just apple feeling the brunt of it. what we're seeing potentially is a collapse in consumer confidence overall. >> dan, the question is then why, is it just because of these taxes or broader sentiment across the country, does it have anything to do with the trade war? what is the root of this? dan: look, we continue to think 80% this is apple specific to a mispriced 10-r phone and we believe it should be 15% to 20% cheaper and a lot of that is a mispriced phone also from a technology perspective, you have the camera technology, chinese consumers which

represent our opinion based on our estimates 20% of all the upgrades for iphones in the next 12-18 months to a key reason. they basically looked at this phone and kind of walked away and where you see with these numbers, look, we knew china would be weak but fell off a cliff. the positives obviously -- >> hang on, dan. you're saying the vast majority of the $5 billion is simply due to the mispricing of the 10-r, what about all the other phones? dan: 10-r is focused on china. take a step back. this was cook and apple's focus in china was 10-r. and if you look at the pricing of the phone, combined, we think 80% apple specific and 20% macro, huawei backlash and just overall headwinds, but a lot of it is the mispriced this given the technology is a huge iphone tech gimb 20% of all overall iphone upgrades are in china.

that's the key and why in this call coming up will be key to how this turns around as well as on the pricing strategy how cook and apple are looking at it. >> we know there are competing companies who make cheaper smart phones and phones much cheaper than the iphone but hat do you attribute this? >> to address this last comment, the entire phone sector in china fell about the same rate apple did. we had also samsung reporting huge losses there in market share. we do have some of the chinese players rising in terms of market share but the overall market is suffering, it's not just apple. >> why are summarizing but apple is not? horace: apple has the premium segment and you would imagine would be suffering more but again, the overall market fell. i think apple is more or less

in the middle of an overall contraction in the market. >> when you look at iphone sales in other regions, we saw u.s. sales overall slightly up year over year, sales in europe slightly down. so dan, where is the growth going to come from if it's definitely not coming from china? dan: look, china is the -- fundamentally you don't need to see major growth here. it's basically you have a plus or minus 5% type of growth give or take. right now you want to see a stable install base where ultimately we have 350 million iphones coming up for an upgrade the next 12-18 months. the fear and what has weighed on the stock is the install base and if that techs down it's a fundamental services story. we believe you start to see a china rebound. but the only way you see that is it they do cut prices more with 10-r. and that's going to be the focus on the call.

because otherwise it would be a loss iphone cycle until september and that's the worry of the bears and the bulls and that's kind of the debate here, do they cut prices and do they take things from a pricing perspective? >> the call is underway and tim cook started speaking and he's saying the macroeconomic conditions were actually much worse than the company initially thought they would be. horace, they didn't break out unit sales for the very first time but did give us revenue for each product category, $52 billion for the iphone, $6.67 billion for the i pat and $3.3 for wearable accessories and $10 billion in services, generally in line with the way the pie normally looks. what do you think the significant is of these numbers not having those unit sales for the first time? horace: first i want to address one thing, the installed base, there was an update given during the investor letter and

up $100 million the last time they gave an update which is a $1.4 billion install rate on devices. >> and those are iphones? horace: yes. you cited the figures by breakdown of revenue by category. we have the ipad up 17% and the mac up 9% and we have wearables and other growing at 33%, just the wearables segment up 50% which was given earlier. so in fact excluding the iphone the business is growing 19% which is still a smaller portion in the iphone but growing very well. i think overall this is a healthy ecosystem, a healthy number of users and there's a growing number of users and we have a great services story on top of that. >> the report of apple's demise are greatly exaggerated? horace: they have been for many, many years, 10 years as long as i've been following the company. >> would you agree? dan: i actually disagree with

the comment in the fact that right now if you look at this, the story has changed and the focus is on the install base side. when you look at services and you look at the install base going forward and the key is what will happen in the next 2-18 months and china is a wedge pin if they don't upgrade. someone who has been long term bull on apple, they are entering a different type of white knuckle period than they have before. only you can compare the two and why i think investor reaction has been so negative. i think what you want to see here going forward is that the pricing will lose in china and fundamentally the services business will feel more and more comfortable at that point. i think the biggest number, the thing all investors are focused on is the services growth margin above 60%. that's the line in the sand and that in our opinion why the stock is up and the first time

they're breaking that and is key to some of the parts evaluation for the services business. >> horace? horace: margins are up on services but during the year ago quarter when we had a greater story, better story for apple, they were up 58% and now hey're at 64%. the story on margins is not a bad one at all and i think we're going to see an increase there as well going forward. to me the key question on an install basis is in order for that to decline we'd have to have people switching out of apple product and we're not seeing that. if deferrals are happening they're staying still within the audience of apple. yes, we should keep an eye on it but i'm not sure loyalty is going in any other direction but up. emily: that was web bush's dan ives and asynko's horace.

the c.e.o. will be stepping down and exiting the company after shareholders approved the deal for sirius x.m. to take the streaming site. others including the c.f.o. will exit the company, sirius c.e.o. jim meyer will oversee the newly combined company. coming up, tess law's fourth quarter results are in and is a miss on earnings and how did the carmaker fare overall? we'll discuss and lodge tech reported strong third quarter results and what to expect this year as they take on gaming. this is bloomberg. ♪

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>> tesla came out with fourth quarter earnings wednesday. the electric carmaker reported figures that fell below wall street estimates.

tesla said they would restructure to cut annual costs by $400 million. to talk about this, this past wednesday we were joined by tasha and bloomberg's dana hall who covers tesla. >> so this earnings report is not a huge price, elon musk signaled to everybody when he announced layoffs early in january me were expecting a smaller profit in the fourth quarter than in the third quarter and that's what they delivered today and missed on e.p.s. but still have cash and can pay off their debt and shares have kind of bounced around a bit after hours but are fairly flat the last i checked. >> tasha, the big question is sustainability. tesla had despite challenges a record year last year. what are you expecting when it comes to production and deliveries and demand this year? >> for demand, we've really seen the model 3 come through in really surprising ways. it's the top selling premium sedan in the u.s. for the

second two quarters. we again in the u.s. saw demand come in really strong and they're just starting deliveries in china and europe. i think we can expect similarly positive picture there. in terms of production, i think there's actually too much focus on production and delivery figures for a company that's really ramping like tesla. at ark invest we're long term investors and looking at tesla as a service company. if we miss production figures by a month or a few weeks, it doesn't bother us so much but looking to the long term and we believe tesla could launch a autonomous service and is the most important market opportunity ahead of it. >> and elon musk focused on production and he said the model 3 would take tesla through production hell. that said, we know the company will not necessarily keep up the production levels of last year and they've laid off 7% of

the work force trying to restructure. how will that redistribute work flow? dana: it's interesting, the shareholder letter said they're now hoping to reach a sustained production rate of 7,000 models, three a week by the end of 2019. remember when august of 2017, music said you should have no concerns we'll reach 10,000 a week by the end of the year. they're definitely walking back some of their production targets but at the same time they're really trying to manage demand. this is a company that builds to order. they don't have a lot -- they try not to carry a lot of inventory and with the tax credit cutting down and these different -- they don't want to build a lot of cars and have them sitting around. it's smart what they're trying to do. emily: tasha, tesla has broken ground on the factory in shanghai. how optimistic are you of tesla's future in shanghai

amidst of these trade tensions? >> we've seen activity in the auto space in china and this year we saw the relaxation of the 50/50 joint venture rule allowing tesla to enter the market without a local partner. we still think they'll have local partners perhaps for supply, of course. but that rule of relaxation actually seemed uniquely beneficial to tesla. we've heard musk say he's had good talk with officials there and complimented them on their science prowess trying to roll out autonomous driving and we think that's the largest market. so it's strategic for tesla and excited to see what goes on there. >> we haven't gotten an update on autopilot in a while, dana. what do you expect to hear on the call that starts in 15 minutes? dana: there wasn't much on autopilot in the shareholder letter but we believe people will ask about it, when will tesla first demonstrate the

autonomous cross-country drive and in previous calls we've had the whole team on the call and i'm not sure people are expecting it this time. there's a sense tesla has fallen behind competitors like to getting to uz a market consumers will feel comfortable in. >> clearly tasha the model 3 and tesla is far ahead in terms of electric cars overall but you do have competitors coming to market, sales for those likely will be small this first year but will grow next year. how much does tesla have to worry about the competition, hether it's audi or porsche? tasha: on an autopilot front, tesla's autopilot feature shows it's sort of competing with companies like wamo. they're coming from a different approach and testing on

suburban roads -- wamo is testing on suburban roads and tesla started on highways but the feature of getting on and off the highway is a problem many autonomous teams have had problems with. on the battery front, tesla will account for 50% of global production this year and when we think of competition, the competition has to get to scale and takes years. tesla has that scale and more importantly have a technology advantage we heard the north american c.e.o. of toyota say tesla is affecting pria sales and creating a new vehicle, a technology driven car and comes through in over the air updates and things competitors don't have. >> now, dana, it's obviously been a tough year for tesla as well, elon musk was fined by the f.t.c. and brought on independent directors and don't know how dependent they are but

larry allison has joined the board and elon musk has been fairly quiet, is there a sense the government and leadership issues have stabilized? dana: i think 2018 was a dramatic year between the autopilot fatality, the f.t.c. investigation, the go private bid. tesla was in the news nonstop and i think everybody in the company and executive level is ready to focus on execution and stay out of the limelight if that's possible. you know, the shareholder letter today was remarkable to me and was a bit conservative in terms of guidance and there weren't pie in the sky predictions and we didn't hear we'll employ another mark. but it was a conservative letter and will be interesting to see what the tenor of the call is today. emily: ark invest tasha kuehne and our own dana hull. drop box has acquired hello sign for $2 million in cash. it counts instagram and list

among customers and the deal is expected to close this quarter and drop box says hello sign will continue to operate independently. coming up, logitech is on track for growth in 2019 and crediting one booming industry. we'll talk with the c.e.o. this is bloomberg. ♪

>> logitech is crediting much of the recent success to the rise of e sports. the company reported $864 million in sales the last

quarter with a 23% jump in the gaming business. the company has attempted to diversify the offering in recent years as p.c. sales declined while mobile and cloud services gained popularity. the c.e.o. joined us monday to discuss. >> i have three kids and all three of them were gamers and right in the strike zone and before i joined the company my kid said logitech is a great company but their products aren't as good as they used to be. when i joined i immediately said where is the gaming group and it was four people and we changed that right away and have a great team. >> how big is the gaming group now? blacken: i wouldn't dare to guess in public lue in the hundreds. >> you still make the keyboards and mice but now making more equipment for game, controllers keyboards, headsets, speakers? bracen: right. gaming in a way, the core business is healthy and grew 13%. the core business of mice and

keyboards and headsets what you see in the gaming business but much higher speck and is increasingly wireless and high quality sensors and designed for gamers. it's that business and we make things for console gaming which are headsets mostly and getting in the controller business and then we're in simulation where you can feel like you're driving a real race car in a simulation game or if you're really adventurous you can drive a farm sim, a simulator for farming. >> did the health of the company depend on the health of the gaming industry and is that a concern given china's recent crackdown on gaming in particular and the health of the global economy now? bracken: when we first joined we had four business groups and now have 13 and we're more than gaming and gaming is on a secular growth curve that will go on forever and will be a bigger spectator sport i believe in the next 20 years but besides gaming we're big in

video conferencing and we make video conferencing equipment for rooms all sizes now and is our third biggest business and our p.c. business is very strong and we're entering new things all the time. >> what's the outlook for e sports? brakken: fantastic. what's happening in e sports for people under the age of 25, they realize this but almost everybody is playing or watching or both. if you're over the age of 35 or 40, you're like what is the e sport thing, is it a craze? it's absolutely not a craze but these people are playing more and more games and playing them longer and they'll grow up and their kids will play and it's going to be big. >> how is your strategy being impacted by the trade war and the concerns about the chinese economy? bracken: it doesn't such the tragedy but touches the operations and the way we bring things to market. we do a lot of manufacturing and have our own factory in china but also manufacture in other people's factories in china and in this case, what we

will do is we're used to moving things in and out of our own factory and we're moving things in other factories, some of them outside of china and where we can just lowering our costs overall and if we need to raise prices we will. >> what's the volume of manufacturing you're moving outside of china? bracken: it's minimal because our a.m.r. business is about 35% of the total business and the u.s. within that would be about 28 and it's about half of that, so small. >> if you need to raise prices, isn't that a concern for the business? bracken: yeah, we're generally the biggest player in most categories and gives us a pricing power and everybody we compete with is in the same price and have to raise prices. >> how about trade sessions, are you thinking different about acquisitions or m & a? >> no, it doesn't for us at all. i think it's probably dimmed the overall market in general and made people a little more conservative which makes things more attractive from a pricing

standpoint so we're still thinking about it and looking all the time. >> from the big consumer tech companies, they've been getting into consumer facing angsriss 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're in them they're in them to finish off an experience but they'd like us to finishoff, too, and do a good job in. it's not a threat but shapes the directions we go in. bracken dare e.o. will. that does it for bloomberg technology. tune in every day, 5:00 p.m. in new york and 2:00 p.m. in san francisco. live streaming on twitter. follow us on technology and follow us on tic-tock. this is bloomberg. ♪

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