tv Bloomberg West Bloomberg November 19, 2015 11:00pm-12:01am EST
>> chinese authorities say they've cracked down on the biggest underground banking and money-laundering operation on record. it is worth about $125 billion. officials joined forces for the operations based in eastern province. ruby and it ishe one of the world -- rupee and that is one of the world's strongest currencies. he also said indian banks must clear their bad debts.
singapore airlines has won approval to take its subsidiary private. it wants to do list after losses and five of the past six quarters. it is not even a third of its value it listed in 2010. hong kong and china closed for their lunch break. the shanghai market almost flat. mumbai.e, tokyo, and slightlyet was dissident. it is bloomberg west now. emily: i'm emily chang. this is bloomberg west.
a very happy birthday for jack dorsey. i spoke with jack about the ipo. investors with a date with much group. for marissa mayer. a shot fired, telling the company not to spin off its stake in alibaba. square surging in its first day of trading. shares closed pricing at just nine dollars a share. the company had been marketing shares at an 11-13 dollar range. prices would have given a valuation below the $6 billion that in its last private financing round. was it a day to celebrate or breathe a sigh of relief? here is jack dorsey with me.
>> i am really excited. it is something that has been a long road. it is what will accelerate business and help us build the tools that serve customers in the right way. i'm excited to get back to work. emily: i caught up with the square cfo. she described the disparity in the valuation. >> ultimately i don't know if we can get into the disparity. we do what we can do best. try to focus a think about what square is here to do, got to build the company. we can build a big impact. that is what we are going to stay focused on. today is one point on that road. emily: revenue is growing fast that it is going down. over the long term they are looking at 20-25% growth. >> we are a company that will
stay in the hypergrowth module. we are so excited. great products like square capital. that is fueling the growth you see today. we are building a platform that is disruptive. when i look 5-10 years i look at technology companies that sustain 20 plus percent growth. emily: we have been talking to experts who say that i am not convinced this is more than a low margin payment process. how would you respond? >> completely disagree. we are building a technology program. software, hardware, analytics. we add on services like score capital and payroll because of the cohesion we see of our platform. emily: you think it is a
technology company. >> absolutely. we get paid the a business model. when they grow, we grow. unlike if i had a software model where i was paid a fixed fee, will they get with a payments model is it scales with their growth. that outlines everyone's incentive. reporter: let's talk about your own role and how have you stepped up? >> absolutely, being part of a company like square, it is an amazing opportunity. what jack is great at driving, we are owners of this company. it is not just about being pigeonholed into one role. i have an ability to drive one of our products. i think going for this process in the next couple of months i have empathy for that because
that is what we have been doing. it keeps us honest and true north of why we show up. emily: let's talk about the non-core businesses. which of these do you see the potential to become a real significant revenue stream? >> there are two i feel most excited about. square capital, and are customer management product. they build on the assets of square. we have the data. we know how to underwrite sellers in a responsible and well done way. we have this huge base of sellers. we don't have to go out to give them capital, we have grown it to $300 million originated with zero marketing dollars.
that is an amazing product. we have the links between the buyer and the seller. in the online world people expect to do that. it is read to be able to link a loyalty offer like have a free copy, and know the customer came back and show the seller that campaign worked. >> at one point does this become 5% of your business? >> if you look, square capital is at significant scale. emily: closest of five? >> we have not broken into parts. it is at significant scale at this time. when i look into it there is somewhat opportunity. it is going to be a big business. emily: your job is to mine the bottom line.
when do you see paring down losses? >> i think about as margin. if you look at the discipline of square, versus the first three of last year, we saw 18 point improvement. if you look at how it is trending, it broke even. we showed we have discipline even though we are growing at 60 plus percent. it is a very grateful are right now. if you look at what the street is saying, look for next year. we are going to be [inaudible] we see a time opportunity. emily: i was talking to jack about the executive theme. he is time constraint. how do you decide when to go to jack?
>> jack is always there. he is engaged. i think what jack does well is he is good at empowering people and letting you run with things. i gave the example of a product, which is unique, and only jack would do that because he tends to lean into the skill set. there is no way it should be done. there is the way we should see it in the world. generally he is part of the staff. i don't see a difference right now. emily: the square cfo speaking with me in the new york stock exchange. another stock we are watching, intel shares climbing after an investor event. sales will grow in the mid-digit percentage range. they address concerns they are suffering from a slowing pc market.
intel is cutting losses in mobile. >> as we go into 2016 we are forecasting and $800 million improvement for these products. the majority will come from product margins. emily: intel boasted quarterly shares. coming up, the investors view. his firm is the largest shareholder in square after dorsey. he is the former square coo. ♪
emily: a stock we are watching, best buy. shares falling to the lowest level in three months. they told investors the u.s. market tech products worsened in the third quarter and holiday season will not be much better. the drag was tablets. one bright spot, ultrahigh definition televisions. it turned out to be a banner day for jack dorsey. his birthday and square's public debut. the stock surged, 45% today giving a market cap of $4.2 billion. jack dorsey gave a one-day paper gain. here is my interview with jack
dorsey. i asked about the notion square did not live up to its private notion. >> this is a fundraising event for us. money to continue to build the business and make sure we are serving ourselves better. emily: where you going to focus? >> on our new reader. we want to see that on the other side of every transaction. to enable anyone to not even have to think about it. my mom open the market today. it was amazing. emily: we've been talking about your executive bench. do you think you are going to need to hire a president or coo? emily: we have a significant bench. i am proud of our team. we have one of the best coordinators in the world.
our focus is on what we need to go forward. we are -- it is a great team. emily: is there a c eo that inspires you? emily: bob iger. i learned from him every single day. he is not just a great coo. he is a great leader. he runs a business that has multiple parts to it. they feel empowered. it is diversified and consistent. they have stuck to the purpose of how the company was founded. everything that walt disney started with is still in the company today. it is something we can all learn for -- learn from.
walt disney was the first technology company, the first ecosystem company. it focused on experiences. it is fantastic. emily: what do you think your biggest challenge is going to be as coo? >> building the strength of the game, recruiting and making sure we're building the right experiences people love. if they love using the tools we are good. emily: what markets are you focused on for growth? >> we are in japan and canada, the united states. in the united states there are 20 million small businesses that don't accept credit cards. their 85 million small businesses around the world that don't. emily: any countries in particular? >> we have a pilot in australia and then we will look for the right market at the right time. emily: joining me from san francisco, the former coo of
square. one of the biggest shareholders. he politely punted on that one. what is your reaction to the debut today ending up at $13 a share, pricing two dollars below the marketed range? >> it is a major milestone for the company and small businesses. i think the ipo is going to boost awareness. it makes it easier for sellers and small businesses to thrive as a business. more of them will be aware of square as an option. that will help boost growth. it gives the company more resources which they can use to convert into more traction in the market. it has been great for everybody. emily: what you make of the disparity between the $6 billion
valuation and $4.2 billion today? does the alarm you? >> i think it is distracting. evaluation at any one point in time doesn't matter. i treated yesterday that paypal went -- it is now worth $31 million. when i moved out to silicon valley, netflix went public, amazon went public. none of these initial prices really matter. emily: what do you make of the notion that square is the first of the unicorns to go public and it didn't live up to its private market expectation, is that a fair comparison? like snow. i think again, the history of square will be written years in
the future. the question is, it is only in the second and third inning of its arc of history and it has a lot to do, and initial product that will expand to small businesses, converging on square as the operating system. there was a host of competitors that wanted to offer attractive products but all of the have failed from amazon to groupon to paypal. square is dominating the most important segment of growth. you will see that. then what is square worth? emily: it has this bright future. of all the unicorns out there, what is the future for the rest of them? >> there is a mixed bag. some of them are going to be the most important companies in the world and some are probably going to fail.
it is hard to discriminate from afar. it would be hard to opine on companies i don't have visibility into. all of your metrics become fair game and everyone has access to them and can make an informed judgment but it would be difficult and precarious to opine businesses that all you know about is through reading in the media. emily: we have talked about house where is dominating small businesses. we got a quote from an analyst said paypal has a big lead with small merchants which will make it difficult for square to expand beyond payments. square doesn't have the user base on the customer side to generate the network effects paypal has more on the merchant site for that matter. what is your response? >> i haven't met a single business in the world that runs paypal products and services in the real world. online they have been successful and will continue to be for a while. i look around every day trying to find somebody who uses paypal
to run their business and have yet to find one. there is some truth to the online transactions that paypal processes that have a network of fact. if you study the metrics, it is starting to erode. more and more people are processing paypal transactions through credit cards rather than using their paypal account. they'll pose a problem in the long run. emily: after the break i will ask about what you think about jack dorsey doing both of these jobs at square and twitter. more with him next, and still ahead marissa mayer future at yahoo! is being question. that story later this hour. ♪
emily: shares ended four dollars above its listing price but questions remain about whether jack dorsey can be the ceo for the long haul. you probably know better than anyone outside of the company. what do you think, do you think for the longer term that he can remain the ceo of square and twitter? >> i believe so. it gets easier and not more difficult. the company is still in the drafting phases of what it will become over time. as you create more network affect, as you have more traction in the market, the incremental decisions get easier and then you are mostly doing strategy and editing.
it can be done across multiple companies easier than doing the hard work. over time this will be very scalable. emily: square is not a public company. two public companies, every quarter, to earnings calls, he doesn't recommend it. steve jobs said it was horrible. >> there is a difference between recommending and can it be successful. spacex is going to be a public company, worth $20 billion plus. it is going to succeed at this horrible job. steve was extremely successful at both companies. even if most would not want to do it, it doesn't mean that the people who want to do it, who embrace the stress don't thrive at it. emily: do you think jack needs to hire a coo?
>> no but the team you build is the company you build. to both companies have the right town or leadership, or the right energy. it is better to have significant leaders in each functional unit. a coo and a president or you don't have that cohesive team, historically in silicon valley you wouldn't want to have a president and coo. that is a crutch to -- emily: is it a crutch for him at twitter or facebook. >> it is an alternative structure but the preferable model, most of the advice is to have significant leaders in each functional unit. where it well is when the ceo wants to play both at the same time. mark is driving the product. that is true at yelp.
what's my credit score? your credit score is 650. that's magic! no, that's credit sesame.com you get so much more than a free credit score so do more with your score at credit sesame.com top stories.of our china authorities cracking down on the biggest money laundering operation on record. -- this was joining forces officials joining forces. intoferring public funds private accounts. japan is considering sending ships to join u.s. patrols in the south china sea. japan and american forces have staged exercises in the south
china sea, but never close to islands claimed by beijing. japan is not planning to join the current u.s. operations. -- trade anders transpacific partnership on the agenda. china is not part of tpp. >> our relationship with china is important. we are the two largest economies in the world. it is important we focus on the opportunities we have to work together as well as the challenges we face. tpp is not standing in the way of a bilateral investment treaty. tpp is really about the relationship among the 12 countries. a mixed bag of trading
activity at the moment across the asia-pacific. yvonne: a comeback coming in the regional index. i want to talk about malaysia inflation. 2.5% for the month of october, that is in line with estimates. slowest pace in four months. the ringgit surging 1.4%. we are counting down to the reopen in hong kong and china. change your alibaba strategy or
face a proxy fight. star board asked yahoo! not to spin off its stake in alibaba. they are asking yahoo! to sell its search and display advertising businesses. the enterprise value is $31.2 billion but excluding alibaba and partial ownership, the core business is actually worth $2 million. joining us to discuss, my guess to has been covering the story. star board is saying that yahoo!, the core of yahoo! is worth $2 billion. how realistic is a proxy fight now? >> the $2 billion valuation sounds low considering these assets they have. revenue for billion dollars a year. some people say zero. depending on what happens with
the spin out. it is still very supportive of management. they want to execute on this spin out they say is going to happen in january. they will sell the shares along with japan. emily: the concern is if they spin off they could oh billions of dollars in taxes and shareholders would be on the hook for them. what do you think? >> great question. it has been a long time, the market has price that into the market cap. they have some discount associated already. it should basically be a fair market transaction. emily: at the same time analysts
are saying marissa mayer's time is up. this year alone we count 13 executives who have left which disrupt continuity. we believe the board must assess if the management team has support and if not a transition to new leadership could be in the best interest of the shareholders. on the other side i have heard people say she has not had enough time. do you think she has? quite she inherited a significant challenge. yahoo!'s best days were behind it. after all the people i know and technology i can't think of a person better suited for the job. you could replace her but you are going to get someone worse. emily: analyst say yahoo! should go private. i wonder how realistic that is. >> a good point that you could get rid of the current management team but who is going
to take it on after them? analysts are saying when you have a spinoff and yahoo! gets separated from this stake then it will be a manageable target for private equity and they can go in and say we are going to change management away from the public eye. if it is not this team, what team could do it? emily: we rarely see major comebacks. apple is the only company that has pulled this off. at this point, how much hope is there? what do you think of what is left? >> the $2 billion valuation is probably close to accurate of what yahoo! is really worth. with a vision and execution and some real risk you might be able to rebuild fundamental value on top of that but you would have to roll the dice and be able to break it to get to a different state.
emily: what does yahoo! look like at that point? if this is successful welker yahoo! be? >> the criteria would have to be that yahoo! has a place on a large segment of american's home screens on their phone. if you don't have an app on a large segment of americans home screens the chance your company is going to be worth a lot is small. emily: what is the next move here? what do we expect from yahoo!? >> they committed to going through with the spinoff. earlier they said by the end of the year, last quarter when they reported several weeks ago. we are waiting to see what happens. the big question is what is going to happen with the tax. they wouldn't give them preclearance. we are waiting to see what
happens. it is unlikely they are going to come down with the this one but you never know until it happens. that is a big thing people are waiting for. emily: all right. great to have you today. thank you for having us. now, google cloud has a new boss. the company has announced the cofounder will be the senior vice president of its cloud business. green founded it in 1998. she has been on the board of directors since 2012. in a blog post she said this is an important area for google and we are investing for the future. the cloud business has lagged behind amazon. coming up, match group making its market debut. ♪
emily: the party is over for american express. the city is suing for stifling competition with accepted fees of 3% per swipe which is higher than what these and mastercard charge. california merchants make the fees that they are earning a cheer. -- each year pretty company will fight the lawsuit. match group is making its trading debut on the nasdaq today along with square. they price the share of $12 apiece.
match owns tinder, ok cupid, and other dating sites. david westin and erik schatzker. >> we think it is important for us to have separation from it. they have a history of growing assets. we sat down the path six months ago and despite what is a tough environment we feel good about where we are coming out. the market likes the company with a long history of cash flow and earnings which we have. we will continue that growth. we have this overlay on top which means investors will be happy.
>> take the ceo out of the picture. is this a sex matching site? when you have a ceo who is so outspoken, who seems unruly, given that you are now a public company and you have shareholders comment you need to make a management change? >> i don't think so. the article, there were inaccuracies and a lot taken out of context. i think corrections are coming in it is not his finest moment but he is creating an incredible asset. >> oe is a good businessman but you need to put a gag on him? he needs to be careful on how he speaks with certain reporters. a lot was taken out of context. >> the key is growth. we've seen user numbers grow
continuously. they are going to be leaving the site. when i think of facebook, i'm not leaving facebook anytime soon. there are a lot of ex-boyfriend's i want to stock. tender and match them going to be one and done. >> people are paying us 50% first time payers. people who have paid and come back again. they are coming in and out of our products over time. people are living longer, staying single for a larger percentage of their times. it is not a direct continuum of they come back all the time. >> you have a big senior citizen game? >> we do have a larger amount on our time. we are distributed from 20-60 plus. >> a lot of us basically know what year company is because of tinder? how much of it is tinder? >> it is a small part of the business.
match.com, plenty of fish, we have been growing for 20 years. they are the ball. tinder is just starting. we think there is big upside to it but the bulk of our revenue comes from our products other than tinder. >> what does it mean if it opens below? >> we recognize it is a choppy market. we think we are undervalued and expected to trade well but we have a long-term view. they would not have priced at where we priced it if we expected it to trade down but i feel confident it will trade well. emily: i'm joined now by our editor-at-large cory johnson. what is your reaction to the way they traded today? pricing at the low in and below the marketed range?
cory: very different dynamics. 87% of match groups are owned by iac. a different animal. match effectively was public in the holding already. investors knew what they were getting. square is a really important ipo for wall street and for the company. emily: why? cory: when you look at the revenue you see a growth business like you would expect to see, a restaurant or a tech stock. revenues growing at a rapid pace and investors like growth. if you look at those revenue numbers you see a company doing a runway at the top line but as you mentioned in your interview, losses are mounting. this company seems to have a wonderful ability to sell more and lose more with every sale. $14 million is hard to do. i can't spin like that. i can spend money. emily: why do you think wall
street doesn't like the payments based as much as other companies? jack dorsey thinks it is a tech company and a payments company. emily: i would agree -- cory: i would agree. there are lots of public traded companies that are already in the payments phase. when you talk about who square's competitors are they would like you to think they are companies like apple and google. and some of the other companies, strike and paypal comes to mind. there are actual companies that have cheaper valuations. the company like heartland has done smaller business for quite
a long time. wall street knows what these companies look like and what the profitability is like. you look at the terrific response wall street because they look at wall street and says they are technologically capable and facing the same consumers. they have a more grown-up business. they are facing the same market challenges. the truth might be in the middle. i could imagine how wall street would look at this deal as such. emily: you and i have talked about the fact that online dating, once you find your match, you lose a customer. why are investors, why is small street -- wall street more interested in a dating site? let's talk about the business side of it. cory: there are interesting demographic trends. people are staying single longer around the world. they are dating more people over
their lifestyle. people are young and date more people, they have sex with more people, those are the numbers. this caters to that demographic change. one of the things that is unique about tinder is that it is a mobile first company. particularly for the younger users, this is in the sweet spot of that business. like so many mobile businesses, the revenue is less than those on desktop. you can see the excitement about the company because you can see the numbers. you can take in the numbers now and understand the online dating business. it is a massive business. it is a shock to me who was dating long before there was online dating. emily: ok.
joining me now, the ceo. 100,000? talk to me about your business. how was your company similar and different? >> similar to square, any merchant with a smart devise can complete any financial transaction. a credit card, a debit card. very similar to the concept that square has in the u.s.. there are a couple of differences. we are plugged into the banking network of india. a merchant can become a virtual bank branch. india has signed up and activated almost 100 million new bank accounts and nine months.
massive growth in terms of delivering multiple transactions. emily: square takes a 2.75% cut of every transaction. what do you take? we don't take anything. the business model in the u.s., you are seeing it in the negativity around the transaction model. it doesn't work in markets like india and china. we actually figured out a way of partnering with banks, turning this from a transaction -- transaction business, so we pass the cost on to the banks and upmarket up. emily: do you consider them a competitor? >> no, not really. i think what we're seeing here, especially in the way we dissected the transaction processing business, the business model doesn't make sense. in emerging markets where there is no spread in the transaction itself there is no merchantable paid 2.75%. different business models for different markets.
emerging markets are going to be dominated by local players. distribution, innovation, different revenue models. they may be expanding, we don't think there is much threat of companies coming into emerging markets. emily: as we watch square go from private to public we talk about the high valuation in the private market and lower valuation today as a public company. what is your take away and learning from that process? how will it impact how you are building easy tap? >> the negativity we saw around the pricing initially is something the u.s. markets are finding out that we found out three or four years ago, this is a terrible business model. having one more person take a cut of the transaction doesn't make sense. emily: you think it is a terrible business model? >> it will not work in india and other markets. it is near zero. that model will have to be changed if you are going to succeed and scale on these
markets. here is what is good about the ipo and square in general, it is an indication of a mobile application sitting on top of all of this infrastructure. i think the biggest threat is not to the application like square who has engagement with their merchants, the real threat is the processors. the entire cost structure doesn't make a lot of sense. you will have to re-innovate and think about the business model differently in emerging markets. i do think there is a lot of innovation and it will be the application layers that merchants will do well. emily: interesting. we will be watching you guys. >> thank you. emily: breaking up is now easier to do on facebook. users have the option to take a break.