>> from the heart of where innovation, money, and power collide, in silicon valley and beyond, this is bloomberg technology with emily chang. emily: i am emily chang in san francisco and this is bloomberg technology. coming up, stocks amidst a shockingly high and ration report. investors wondering if the fed will get more aggressive. we will talk about what it means for tech ahead of a key earnings season. plus, an exclusive conversation with ibm ceo. what is his view on the economy

and the supply chain? we will ask that and more coming up. in the first ads on netflix will be brought to you by microsoft. were going to tell you about the deal between the two tech powerhouses entering the ad business. all of that in a moment but first, i want you to look at the markets, another day in the red and no thanks to inflation. ed ludlow here with all the latest moves and take it away. ed: cpi for the month of june coming in hotter than expected. equity markets, sometimes they go up, sometimes they go down, sometimes they do not move at all and that is where we are at with the nasdaq 100 ultimately down a 10th of 1%. i don't normally do this, this was the session on wednesday, we start significantly lower. concerns about inflation, that the fed will have to go further to tackle inflation, inducing recession. it was a volatile session swinging between gains and losses. we are down. you bring up the next board, you look at the breadth of the technology sector, the nasdaq

100 tech heavy index down in the red, but there were pockets of strength. look at the philadelphia semiconductor index update tens of 1%. signs from capitol hill in d.c. that this administration wants to get going when it comes to fixing the supply chain around semi conductor errors. the index mega caps up three tons of 1%, but some of those in the red. we will talk about it in just a second. yields pulled back, we are very focused on what the fed is going to do and what they will not do going into the next meeting. tech stories and stocks are on the move. i'm looking at some names in particular, one of which i would like to talk about with you every single day, emily. twitter update percentage points. the latest being that twitter has sued elon musk to hold its original deal. netflix up 1.2%. the deal with microsoft, who will provide digital infrastructure for an ad supported version of netflix. they're going to provide the backend essentially, a platform for the ads and for the sales. worst performing stock on the

nasdaq from hundred -- 100 was google. reported by bloomberg that they are slowing down hiring and the sunnier days quote thing is in the air are over. sorry to ed on that. -- sorry to end on that. emily: thank you. so what does another round of high inflation data mean for tech specifically? with earnings season about to get underway i want to bring in liz young. what are you expecting. is every day going to be like judgment day for the next six weeks? liz: i think it might be and this is not just tech specific, these comments. i think earnings season, what needs to happen is we see revisions downward. usually, things happen in a sequence. as we have already seen, the market has broken, the market has sent us a signal that there is rough waters ahead, whether that be corporate america or the economy. now we need earnings to meet that signal.

right now, we have earnings expectations through the end of the year, 10 to 11% growth and in 20 23, there are lofty expectations as well. i think that is profit markets get pinched and ceos talk to us about q2 earnings, they may still have had a strong two, but the guidance going forward is likely going to take a hit on inflation, from the tight labor market, from the increase in costs that they have seen over the past six months. emily: what about tech in particular, why has tech been underperforming the last several weeks? liz: the last several weeks i think have been characterized by a market that is trying to figure out what the biggest problem is and what their biggest fear is. and we have had a lot of trading that has been rerate related. and tech is so sensitive to the rate environment that as we continue to get data that says you know what? the fed is going to have to keep going because inflation is such a big enemy that hurts tech

shares, that hurts high-growth shares. there have been many rallies in between, we have seen attempts at a rally in tech and some of those growth names, but there has been a lot of give act as soon as the market realizes that the fed is still on this bandwagon, regardless of the fact that we have increased recession fears over the next 12 months in the near term, the fed is still going to fight that growth narrative. emily: so let's talk about the signals you're seeing now. based on what you are seeing, is a recession and that -- inevitable? liz: nothing is for sure, nothing is guaranteed. at some point, there will be a recession, that is how the business cycle works. however, what i will say is that some of the signals that we look at, such as yield curve inversions, now we have gotten a deeper yield curve inversions down 21 basis points as of today, which is the biggest inversion we have seen so far aside from some of those many inversions earlier in the year.

that is a big signal and that is the market saying we are afraid that this hiking cycle is going to take us into recession. here is what i would say about a recession. we may find out at the end of july that we have another negative gdp print for the second quarter, which would be technically a recession, but it is an odd one. it is one where the labor market is so strong, we are creating jobs. we got a consumer that is still spending and maybe is frustrated by inflation, but has not stopped spending because of it. so the fear of recession did not hurt demand to a point enough to bring that inflation number down now what i think the market is grappling with is is there a classic recession coming at some point, perhaps in 2023, that does actually affect the labor market, does bring demand down, but it takes care of that inflation problem? it is the path to fighting this inflation a monster that we are all trying to figure out. emily: speaking of that monster,

how much of a change is so five seeing and spending and borrowing habits right now? do you see customers being resilient in their spending or our savings shrinking? liz: look, i mean with our bank charter earlier in the year, there is a difference we are seeing, but the spending patterns are pretty consistent across consumers probably. everybody is still spending, they have just changed their habits. so what you find and this is a broad consumer statement, what you find is maybe consumers have pullback on certain items and we heard this earlier in the year from big retailers. maybe you have pullback on certain items but started to spend on other items. you are going to see naturally in a business cycle a contraction in spending in durable goods. but other spending has still held up. we are still seeing in all consumers the desire to travel. we are still seeing airlines that have completely full flights despite the fact that they keep canceling all of them. they are still full and there are still people out there with

the appetite to travel, despite higher gas prices, people are on the road. consumers have not necessarily been hit by this yet, but this is much like the profit margin story. consumers came into this time with a lot build up in savings. they could absorb some of those price increases, plus they had such a desire to get back out there again, which is why we are seeing inflation in services. much like companies came into this with record high profit margins, they can absorb some of this into earnings, but they cannot all of it. emily: you know, i am curious whether out you are watching this tesla twitter story, tesla is such a massive stop now and we are seeing it get caught up in the ups and downs of the one most twitter saga. getting new headlines from the ceo of twitter in a memo to employees saying they're going hold him accountable for the $44 billion deal. every time any news breaks, you know, it impacts not just twitter stock, but tesla stock. do you see an impact on the broader markets here or is this

a separate narrative in itself? liz: i think some of this is very company specific, because this is not something going on across the entire industry. at this point, i do not think there is an impact on the broader markets, but as we get through the remainder of the year, we start to hear things about other companies. i think the m and a activity may pick up later in the year and into 2023, which is not the twitter and tesla story, but the m&a narrative could pick up. what you might find as the economy slows further is that those transactions, those mergers and acquisitions, are happening because of financial reasons, not because of strategic reasons. that was something that if we start to hear a theme across companies in certain sectors that have been hit really hard by this, that is something that would affect the broader market. emily: interesting. list young of sophia always good to have you here, liz. thank you for giving your view of the situation. coming, ibm ceo is here.

i will ask him about his view on the macro headwinds ahead his view on m&a and how it is impacting his cloud and growth strategy ahead. this is bloomberg. ♪

emily: well it has long been a bellwether for corporate spending and these days the view for ibm could be a good indicator for which way the macro headwinds are blowing joining us in the studio that ceo oh of ibm himself. great to have you in person. arvind: always great to be with

you and this time in person. emily: thank you for taking time out of your trip. we've got a lot to talk about. i got to get your view on the macro economy. what spending areas are you planning for, do you think a recession is inevitable? arvind: i am more optimistic, so i am caution it's not directly to consumer. so we see the spending environment right robust. we see our demand signals. we see pipelines. we look at industries and part of it may be that technology is the answer through these problems. when you look at supply chain inflation, labor demographics, interest rates, technology offers you a way to scale without increasing cost that are linear or close to linear. so i think that is why technology spending, i believe, is going to remain robust in our moderate scenarios.

this is something extreme, that is different. i do not expect that. emily: are you planning for extreme scenarios? do you have to plan? arvind: we plan a bunch of scenarios, but the plan is on paper. which ones do you expect to play out? there is a middle, there is a more pessimistic, there is a more optimistic, none of those are extreme. emily: we're hearing the ceo of service now giving a pessimistic forecast and you have snowflake with an optimistic forecast. who is right? you are optimistic. arvind: i am optimistic, i see technology spending as above gdp growth. whether it is 3, 4, 5 points, somewhere there is going to remain technology, including any rub is our view. -- in europe is our view. we are more optimistic than pessimistic for sure. and that is why in april, we could see some of these headwinds were talking about in april. we did forecast that we would see the high-end and of single

digit growth for ourselves. i put that to the side. how is this all impacting your strategy, your cloud strategy, your growth strategy looking ahead? arvind: it is reinforcing the play we called could we called a play on hybrid crowded and artificial intelligence. -- hybrid cloud. we see that as helping our clients through these issues. we cai as helping on the productivity issue, when you look at ai, $16 trillion will be unlocked over this decade pretty look at hybrid cloud, trillion dollar opportunity. all the clients want. a few public clouds still have their own on premise private cloud, so you look at how you help clients navigate through that. we give them a technology roadmap that lets them succeed in the face of sovereignty, in the face of resilience, in the face of supply chain issues. both of these technologies are turning out to be great, great opportunities right now. emily: let's talk about the

supply chain. are you seeing relief? how much longer does the supply chain pain at last? arvind: i actually may be a bit more pessimistic on that than optimistic. i think supply chain resilience is a real fundamental issue that is going to go on for a couple more years. emily: what are the impacts of that? arvind: the impact on the consumer side is obvious per to higher prices. you can see that. on the enterprise side, the supply chain is going to cause more delays, more people sort of wondering about where is my supply chain? it's not a simple issue, that is what i think nations and leaders have to wake up to. it's going to take two or three years for us to resolve this and that is why i say this is not a simple issue to get resolved. emily: it'll get worse before it gets better? arvind: no, i think we are at the worst of it right now. but the worst does not get better right away. that is going to take a couple

of years. emily: obviously chips are in a supply, including we have been following the chips act. looks like there was bipartisan agreement that this would get past. still has not been passed. we spoke to commerce secretary gina raimondo on bloomberg television. take a listen to what she had to say. >> yes, it will get done. at this point in the negotiation, unfortunately, politicians look or leverage. and while it is not right to play politics with national security, that is what i think is happening in the past two weeks, we made huge progress. we were closing out issues, finding compromise, so i think everyone just needs to come back today, get back to work, and commit themselves to getting it done in the next you weeks. emily: so she sounds like she is trying to be optimistic, but she is also clearly frustrated. i mean, you've got companies about -- like tsmc spending a

hundred billion dollars abroad to increase capacity and we cannot even get a $15 billion bill pastored what is it going to take, have you been locking -- talking to lawmakers? arvind: we have been talking to lawmakers on this issue, on the chip side for the last year. you have a very strong belief that these are good bills for the united states competitiveness. he believed in the sake of national security, but also business in general. these are good things to get done. the act is essential. emily: will it happen? arvind: i believe the chips act will happen for it i cannot predict exactly when it will happen. will it be part of its own, we are not experts on that. what we can say is that we are happy to put our voice behind the chips act, we are happy to call sellers on both sides. we believe there is bipartisan support actually for these acts. and that is what we are willing to go ask for support. emily: you rapture for

acquisition of the year. with these depressed valuation, is that making you open to more m and a? arvind: short answer is yes, but it is not a question of depressed valuation. m&a has been part of our strategy. about a year ago when we set out on investor day, you should expect us to do three to 4 billion a year in acquisitions in a normal year. now, when valuations are right and you can get the most attractive target, it is going to be good for us, we would be willing to lean in and borrow ahead from what we can do. you saw a great example for years ago. emily: new ceo there. arvind: and it has played out for us and we played down the debt we took on to acquire that. things like that you can do once in a while, but you would absolutely expect us to continue to be resilient as we have been. emily: are you saying we could see a bigger acquisition like that again or are we going to see smaller? arvind: the smaller ones are a sure thing, the big one will

depend on the attractive opportunity. it has to be something that aligns with our strategy and that brings in the significant synergy. so if you get those things in play, maybe. that's a maybe. emily: what areas are you buying? arvind: the areas are going to be straightforward, does not matter small or big. software and consulting and in both of the areas within that, in terms of technology, hybrid cloud, security, data and ai and inflation. these play into the current economic themes around the globe. emily: speaking of the new ceo just named, what changes will this bring? arvind: this does not bring change could this has been planned for a while. they give us four years since we announced the acquisition. he has not gone by the way, he is still here as chairman. matt has been in this place for a long time. matt has worked for almost 16 years, so we should not expect

significant change. and matt was the leader behind our open share strategy, behind containers for the last three years. he is the leading products inside red hat, so you specs the same intensity, doubling down on the winners, but not a significant change. emily: last question, obvious a, you been at ibm, but in the ceo seat now for a couple of years. and through a pandemic. what are your goals for let's say the next five years? arvind: number one's relevance to clients and that comes from the areas we have picked. we have picked our areas and were going to double down on them. that results in revenue growth for the company, it results in cash flow growth for the company. that is a return to our investors. apart from that, my goal is clear. we want to build a platform that is going to stand the test of time. the mainframe was a great platform. it is time to build the next platform, which is going to be based on the hybrid cloud technologies from red hat, but

also ibm is innovating around that. that will provide a stream of revenue and relevance for 2, 3, 4 decades maybe. emily: all right. big promises, we will be watching. ceo of ibm, great to see you in person again. thank you for stopping by. arvind: always good to be here with you emily. emily: much more on bloomberg technology ahead. stay with us. this is bloomberg. ♪

>> whether it is the apple watch pro or explorer addition, apple is set to give the apple watch a pro tier for the first time this fall. this involves a strategy that has brought the iphone pro, macbook pro and airpods pro to market over the last several years. the pro apple watch will come in the form of a new model that is

named -- and at extreme sports athletes and anyone else seeking the most advanced smartwatch available. the high end model will have a larger and more shatter resistant display, a rugged metal casing, a body temperature sensor, improved hiking and soon tracking, as well as battery life apple's new watch will come in a case size between 46 millimeters and a seven millimeters up from 45 millimeters on the apple watch series seven of today. the new screen will have about 7% more active screen area than the currently largest model. i also think that the new high-end device could replace the apple watch addition and come in durable titanium. given that a bigger screen and higher and construction are in play here, my guess is that the new device will start at between at $900 in thousand dollars approaching the price of an iphone 13 pro. for those not looking to pay for an apple watch at that price point, there is also a new apple watch series h coming as well as a new low-end apple watch st the

series eight will have an updated display and the same body temperature reader, while the sd will have a faster processor than its predecessor. i am mark, this is power on. emily: you can subscribe to mark's weekly power on newsletter at bloomberg.com. all right, coming up, gaming platform unity doubling down on mobile ads, spending nearly four and a half billion dollars to acquire iron source in the face of apple's added tracking changes. we will ask the ceo of unity why now for this acquisition? coming up. this is bloomberg. ♪

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emily: welcome back to bloomberg technology, i'm emily chang in san francisco. twitter shares surging, the biggest jump since april. after the expected delaware court filing. suing elon musk, ed ludlow with the latest. i know you have been coming through the complaint and twitter came out swinging. ed: it's interesting to see the share price reaction, because we are both hearing that it's not twitter trying to get damages or twitter trying to save face. this is twitter saying elon musk, we are holding you to the deal. emily: pay up, 44 billion. ed: you know, they are at pains

in his long court document to point out they did hand over lots of information to elon musk and they tried to donate it -- demonstrate that it was elon musk who was not cooperating. he was not engaging with them, he was not for filling his obligations under the deal. emily: so instead of saying we gave him all this information, he did not even look at it? ed: there are screenshots throughout the filing, where they basically say we engage with you. we handed over data, we tried to explain it to you. remember that last week, thursday, twitter executives gave a briefing on bots. if you hours later, the washington post story comes out saying it cannot be true. it cannot be verified what twitter is saying. twitter came out saying we have given you all the data we possibly can trade what we are telling you is that a third party cannot verify it because

we hold private and public data on this issue could whether they are right or not we will find out in court. emily: what are the chances of the court can hold elon musk to this? and force him to pay up? ed: we got some breaking news after market on wednesday that the internal memo at twitter, telling employees brace for some challenging times ahead. this court case is going to be noisy, he said. there's going be a lot coming out of it. most lawyers that bloomberg spoke to things twitter have a great case. -- think twitter have a great case. these bankers that look at deals and think what are the chances of this happening. that is why we saw stock pop on wednesday, because they feel that were moving towards where the deal will happen. emily: the market thinks the deal gets done? ed: would also point out that hindenburg, a known short seller came out and said they have a long position on twitter on wednesday. they feel that elon musk is in trouble, their words, i am paraphrasing. they think be held to account on it. it comes back to this phrase which i've been hitting you over

the head with. material adverse effect. the chart on the screen, that is the spread between the current share price and the $54 offer price. it has narrowed but what merger specialists tell bloomberg, those deals experts, is that it is not that they do not think the deal will happen at all, they think we are moving to a place where one scenario is he comes back in with a lower price point. and they say they have always thought that. now it is complicated because twitter has said very clearly they want $54.20 a share. emily: bloomberg intelligence putting the deal chances at 60%. that is quite optimistic especially in the face of elon musk, right? ed: it is optimistic and the probability has swung as low as 30% to bloomberg intelligence says 60%. the question is what are the unknown scenarios here? emily: whenever you're dealing with elon musk, it is always a possibly. ed: settling at a lower price

point is a possibility. those that i am speaking to basically feel like elon musk has used up his leverage, because he made some very public tweets. and, you know, ultimately, the court of law will decide this one. emily: right. it is all there. ed: in black and white. emily: ed ludlow, thank you for coming through that for us. appreciate it. gaming service provider unity software is spending upwards of four point or billion dollars to buy iron source, to boot up its advertising technology. the all stock deal sent shares of iron soaring by nearly 50%. unity on the other hand felt by double digits today. bloomberg intelligence sees the deal as a real opportunity or unity to expand its reach in advertising, particularly in app mobile abs. ds. to discuss at all, john. you have been in the gaming

industry for decades. what do you have to say to investors who are skeptical that this deal is good for you? john: well, a couple of things. i think we have set out a vision for precisely how this merger, this deal will help us make sure that our customers can make better games and make a better business. and when we improved the business of our customers, we are going to do well. we also sent out three very specific synergies, where we are going to realize benefit right to the bottom line. and we framed out that we expect to see a run rate in 2024 of $800 million. that is a lot for a company of our scale and we really gave it to them precisely, the outlook. mna and a day when the market trades down, there's a lot of things that happen. my job is not so much to think about what my stock may do tomorrow, but to make sure that we are building a company that is going to be super valuable in

the long term. it has investors like a comfortable. and also see it in the results could i have confidence that we will be fine. emily: so how did it impact apples privacy changes? john: none at all actually. so these were understood well before what we considered looking at in iron source. and as we have reported, there is durability and long-term viability to the ios side of gaming advertising. look, it is a huge market. three to 5% applications are paid for by the consumer. 97% of consumers do not pay. hence, the need for advertisement. it is a real important track. in almost no industry do users or players or viewers think that advertising is a positive. the only industries i'm aware of

in the gaming industry, mobile gaming in particular, they tell us time and again that they think the advertising is positive. and we can prove it, because games with advertising, when tested against those without achieve higher levels of engagement. and so we know this is true. i think it is the envy of everybody in the advertising world. it is performance averaging. our customers, what they get for us as return on investment. maybe they want to spend less and sometimes they do not want less. emily: interesting. unity did have a round of layoffs recently. you cut your guidance for the full year. are those kind of issues behind you, given the macro economic headwinds we see ahead in every company? john: well, first off, i mean, let me just talk a little bit about the layoffs, because i think they were somewhat blown out of proportion. by some of the press.

where a company of 6500 people, we eliminated 250 positions. and we offered half of them knew roles that would be a better career opportunity inside of unity. and for each and every one of those individuals, look, i think it is important to make sure that everyone is treated well and we treated them super well. a loss of that number of jobs at a company of our scale through the focus, look, we are not the interior government where everything lives forever. some things are working better than others. we allocate to optimize our opportunity in front of us. so look, it's always unfortunate when even one person loses their job, but we did it in a way that i think is positive for those involved as it could be. everyone was given an opportunity. half of them were given offers. a lot of them will end up back at unity because it is a great place to work. emily: so, i know you are

expecting to generate $1 billion in adjusted earnings. will that still happen if there is a recession ahead? do you think a recession is inevitable? well, look. i think one of the things that always happens any time you start talking about the fed, is the only thing that is truly in great supply is pundits. john: so i do not want to get into trying to be a pungent. there is definitely some evidence of a slowdown. whether it will register as a full-scale recession. but here is something, i don't know, i will point out a couple of things. certainly economic cycles affect businesses, but if you go back over the last 20 to 30 years, you look at each and every time there has been a recession, one of the industries that fared the best is the gaming industry. lots of reasons for that, but it is a relatively inexpensive way to entertain yourself. it's one thing to get into a game and a one dollar in app

purchase. it's not loses same thing as buying a new f-150 pickup truck. and the other issue is this is performance-based. so to the degree that recessionary things happen, they are always going to buffett industries. i think this is a sector that will buffett it are less, so we feel confident in what we outlined or we would not have said it. crystal balls are never perfect, but we think we've got the right collection of assets and in this instance, we are strengthening our hand with in combination with unity and ios, if we can help our customers make better content, we know there is long-term success in that. emily: thank you for giving us your view into your crystal ball, john. always good to have you. john, ceo of unity, appreciate you stopping by. all right, bill gates is donating $20 billion to the bill

and melinda gates foundation this month. the foundation has a new goal of increasing its annual giving by 50% to $9 billion a year. gaetz latest donation brings the foundations total endowment to about $70 billion. coming up, to the collapse of one of the largest crypto hedge funds are -- it's further crypto selloff. we will dive into this week's big take next. this is bloomberg. ♪

emily: the rise and fall of three arrows capital is shedding light on the obscure practice of selling crypto ferns. they bet on prices only going up. known as one of the largest crypto hedge funds in the world, they invested in some of the best-known startups, but when crypto prices turned, three ac unraveled amid accelerated decline. that is the topic of this year's big take, titled when hodl failed, the collapse of three arrows. joining us now crypto reporter who cowrote this piece. so talk to us about the most dramatic twists and turns in this all. >> i think the most dramatic part is how a very well-known hedge in crypto just fell all of a sudden. i think this was such a surprise to so many unlike a lot of our previous using crypto, people

inside crypto in general were aware of. emily: did the collapse of three arrows really cause or lead to potentially the crypto -- broader crypto contagion? muyao: what we have seen so far, there is definitely contention in the crypto market right now. we are seeing some of their bigger counterparties, for example, the canada-based voyager digital, they announced bankruptcy as a result of exposure to three arrows. who are at tons of money from voyager and was not able to fulfill the obligations. emily: talk to us about the role of transparency here. i mean, where they betting that crypto was going to go up? what hedge funds does that? muyao: that is i think one of the things that i most per sonally found surprising. that these two people were former traders, they are supposed to be intelligent,

sophisticated traders in crypto. but it turned out literally every single person i talked to told me they are the biggest bulls in crypto and they believe this erie of super cycle, that crypto would never fall -- theory of super cycle that crypto would never fall like other markets and they put up big bets in every project they invested in. emily: how does the crypto market move on from this? obviously, it's not just three arrows per it have seen the collapse of terra and it has scared off a lot of investors. muyao: yeah, i think that as you said, the transparency issues and trust crisis in crypto right now, moving forward, i think this market, this space really needs to be more transparent. for example, the big lenders, they need to communicate with each other. talking about who is borrowing money to whom, to make sure none of their counterparties are going to big to soon, to have more impact across the market.

emily: all right. well, i am sure we will see it more ahead. bloomberg's muyao chen on this bloomberg big jake. coming up, netflix exit partner as part of a strategy to round up you subscribers. they are offering a cheaper subscription with another tech giant that has signed up to help. that story next, this is bloomberg. ♪

emily: welcome back to bloomberg technology. netflix has chosen microsoft as its tech and sales partner for its new ad supported streaming service in hopes it will reunite subscriber and revenue growth. joining us now is bloomberg's lucas shaw. what are we learning about this new deal, if you will? lucas: netflix is not saying an awful lot about how it will work. we do not know if there will be ads before a show starts, in the middle of a show, both of them,

we do not know how many ads, the prices of the ads here. the only thing we know at this point is that they are relying on microsoft for a lot of the back and work, not anything that the customer will see, but it will be microsoft sales teams that sell and microsoft technology that will handle the apps that we all see -- the ads plc. it is not a as big of a player in the ad space as google or comcast. emily: right. it was news to me that my croissant had a burgeoning added service. -- that microsoft had a burgeoning added service. is there some rod or goal here, taking on some of its competitors -- broader goal taking on competitors? lucas: it microsoft said laster its ad business was $10 million which is not as big as some of the big companies. not as big as google or facebook. they acquired xander, and add business that at&t had built up last year in a deal that was estimated at a billion dollars.

xander is not the best in class, but it try to compete with google and facebook. obviously so did linked in, so it is building a robust add business to compete with layers like amazon and google and facebook. emily: so here is the question. i mean, we have heard content is king, it is all about content. is it all about the content or is an ad supported service that is somewhat cheaper really going to make a difference when it comes to racking up subscribers? lucas: if you are netflix right now, you have 220 million customers. they say that each one of those subscribers is really like say three and a half people, so they are already at 600 700 million people using their service. there are only so many people that will pay for it. the ads help them on a couple fronts. one, it could appeal to some people who do not want to spend quite as much money. and in some of these cases, the ad supported services generate more money, because people are paying a monthly fee and you can

make a lot of money from the advertising. netflix is associated with quality programming. they need to both keep increasing the customer base and make more money, so this could do both. it's the same reason they are trying to do what they call a crackdown of password sharing, so they can get other users to pay more who are already using netflix. that is a win for them emily: lucas shah, thank you for your reporting here. keep watching. meantime, want to end the show with news out of tesla. the electric vehicle makers autopilot chief is leaving the company. ed ludlow back with more. this is a critical role. ed: he has been a tesla since 2017 pretty went on leave in march and sources have told me this was a guy who did not leave in five years pretty went on leave, tweeted he was leaving tesla in strong capable hands. implied that the work on ai to power the technology has come a long way. but he is doing something new. emily: do we know if this had

anything to do with disagreements or a d prioritization of the work he was doing? ed: last week reported tesla laid off 230 autopilots as part of the program. they worked on it their own shifts, their own computers, to help the ai train neural networks to improve this technology. he has been on leave, we don't know what's going on behind the scenes and now he is called time on his tesla career. emily: another problem for elon musk. ed: he is grateful for the time he had. emily: what has elon musk said so far about the twitter suit? have we heard from him? ed: he tweeted " oh the irony lol". emily: how are we expecting this story to progress in terms of moving through the courts? when are we going to see another development? we have seen twitter so low. ed: elon musk geithner sous, it

could go to trial very quickly. -- elon musk counter sues. in court for years, some are bracing for. emily: what happens to twitter in that time? ed: it is a real financial headwind, it is a public relations headwind for them. emily: for employees? they are trying to recruit people, keep the trains running. ed: that was part of what twitter ceo said two employees on wednesday could we are facing a changing economy and a difficult case. raise yourself. emily: what are we hearing from employees? i know you were talking to a lot of people. ed: if feel like twitter's management has been on the back burner this whole time, they should have been more proactive. that elon musk's whole hand a few weeks ago -- it was the final straw for a lot of employees. and they have frozen hiring, cut projects. it is not as happy -- a happy

place to work. emily: indeed. all right, ed ludlow, thank you. that does it for this edition of bloomberg technology. tomorrow, we will be joined by kate reiner, she will talk about the role telehealth will play in the state-by-state debate since roe v. wade was overturned. don't forget to check out our podcast pretty confined us wherever you get your podcast on the terminal, apple, spotify, google way and more. -- google play and more. i am emily chang in san francisco. this is bloomberg. ♪