tv Bloomberg Technology Bloomberg June 25, 2019 11:00pm-12:00am EDT
emily: i am emily chang in san francisco, and this is "bloomberg technology." san ng up in the next hour, francisco is home to juul, but officials seem to have to want nothing to do with it. we will talk about the city's crackdown on vaporizing. plus, cyberattacks linked to the u.s. and iran. what is the endgame?
oracle challenges the bidding process with the u.s. defense department. will it force the process to stop? san francisco is expected to be the first city to ban -cigarettes. they will hold a final vote to ban the distribution and manufacturing of e-cigarettes, making them illegal to sell in stores or online. if approved, it will be signed into law. it could pit the city against juul labs. it is backed by big tobacco and brought in more than $500 illion in revenue. to discuss this with us are our uests. what is the status of this right now? >> we are waiting for the city
to vote on whether to take this step. we are expecting it in the next couple of minutes. juul has become a really controversial company. san francisco doesn't like them. the main reason is kids are using their products. emily: the health risks are largely unknown. you are inhaling heated liquid nicotine. the long-term risks we don't know. critics argue it is better than traditional cigarettes. >> the sale of traditional cigarettes and marijuana will still be allowed, but people are saying because we don't know these risks that it is too much to let kids in schools to use them. juul has said it is trying to prevent underage use of these products. emily: she makes a good point.
alcohol is legal, marijuana is legal, e-cigarettes everywhere else are legal. does it make sense for san francisco to ban a legal product? >> it is a very san francisco move. it is brimming with technology, but the city government from the tech perspective does not always feel super friendly to it. it is also a city that has put a soda tax in place and is on the forefront of the straw debate, so the city is happy to tax and restrict products in ways they see that are to the benefit of itizens. that is clearly the case here. there is the risk that juul is leading children to take up smoking when they wouldn't, pitted against people who otherwise will buy cigarettes hile they are legal, who would
use e-cigarettes to try to mitigate the danger to them and consuming nicotine. emily: right. some of the concerns have been around the flavors. hy have a bubble gum flavor if you're not targeting a younger demographic? juul says the prohibition will not effectively address under 18's and leave cigarettes on the shelves as the only choice for adult smokers. if you look at statistics. the use of traditional cigarettes is way down, but vaping has spiked. the number in the united states has gone from 2% to 20% of u.s. teenagers who have tried e-cigarettes. what is san francisco really concerned about? >> they say one in four high schoolers and one in one in four middle schoolers have tried e-cigarettes. i think san francisco understands that it might not have a huge impact on juul itself by putting through these measures, but they're hoping other cities will follow suit
and it could have an impact on the use in the country overall. emily: what are we hearing from investors? this company is making money hand over fist. international sales are exploding. there is an indonesian giant about to sign with juul. shares are skyrocketing because of that one deal with an e-cigarette maker. you have investors think this is the lesser of two evils. >> you saw one investor pour into this company when it was controversial, then altria did he deal. the fact of the matter is nicotine is addictive and there are lots of people hooked on cigarettes who like e-cigarettes, and that is a very profitable business. there will be this fight between
the history of nicotine-based products making companies money and regulators who want to protect their citizens from addiction. some investors are certainly happy to profit, and some would argue this is a technology that will help people move a wave for more dangerous products, but certainly juul's history with flavored tobacco products will hang in anyone's mind when they think about the company, someone who started off with a product that really appealed to teens. emily: san francisco has paved the way with controversial rulings before, legalizing same-sex marriage, the first state to do that, banning grocery bags, the first city to do that. we don't know what the right side of history will be in the situation, but juul is stuck between a rock and a hard place.
this looks like it will overwhelmingly pass. what is their plan b? >> they are moving to get on the november ballot measure that would ban the sale of e-cigarettes to anyone under 21. that would be more of the restriction than there is right now. that would supersede the ban should it pass. emily: there is also this potential ban on real estate and operating here. >> correct. juul is headquartered on city roperty up the road. the city is looking at passing a measure that would ban the sale, distribution, and manufacturing of e-cigarettes on city property. juul would probably be grandfathered in, but they have bought a new building and they will start moving employees there. that is a way around that. emily: we will be watching and bring you the results of that vote as soon as we have it. thank you both.
now to micron, the largest u.s. maker of memory chips reporting profit that beat estimates in the third quarter, a sign the company has been weathering the fallout of the trade war better than expected. huawei was one of micron's previous customers. coming up, whatsapp and messenger have more than one billion users yet generate no cash, how the cryptocurrency libra could change that. if you like bloomberg news, check us out on the radio, the bloomberg gap, and in the u.s. on sirius xm. this is bloomberg. ♪
emily: facebook hopes its new cryptocurrency will change industries, but if it's likely to change anything, it will be its messaging business. mark zuckerberg could be taking a page out of wechat's playbook. it has almost one billion users, but make no money from those essaging services. will libra be the answer? ith us we have our guests. ever since facebook bought whatsapp, the question has been how are you going to make money on it. the same with messenger. how could libra help? >> there is speculation this could be a payments play. if you have a digital currency, a digital wallet, maybe you will use that to buy goods and
services, maybe pay your bill someday? we have seen how wechat has become this master app where you can do all kinds of things. there is some belief facebook could be the same thing and there is a way they could take a slice of that. emily: lawmakers have called a hearing on this in mid july. they are not happy about it. maxine waters is calling for facebook to stop developing this. describe the backlash in washington. >> ahead of the libra announcement, there was tons of skepticism about facebook in washington with the privacy issues and the holdover from the 2016 election. a lot of this stems from the fact that lawmakers want these hearings because they want to know whether this is about facilitating payments or making facebook more powerful than it already is.
and more powerful in no way that lawmakers don't have oversight of. the committee's calling for these hearings, they are traditional constituencies are hedge funds, traditional financial companies. if there is major financial activity outside that regulated sphere, it is basically out of washington's hands, and that is obviously a concern. emily: what is the goal? hard to believe this is not a play to become even more powerful. >> facebook has always had this idea that if it can capture your everyday activity somewhere within the app, it makes it hard to get rid of. you can't abandon facebook if that is your only lifeline to friends and family, if that is how you buy things, pay bills, or send money to your family cross-border. the more utility they can build in, the more they think people
will be hooked and stick around. emily: what could be the results of this hearing in july? could congress forced facebook to stop doing this right now? we have been waiting for regulation out of washington, and to be fair, cryptocurrencies has been around for a while and regulation has been slow to catch up. >> lawmakers can't really stop it. they can jawbone, name and shame, but they don't have any power to make facebook hit the pause button. if they have that power, we would have seen maxine waters already tried to execute the power, so it is kind of harassment, the go to in washington, and i don't know what kind of impact that has on facebook. for a typical company would have to answering questions and being embarrassed publicly would bother him, but the fact
facebook roll this out when they are already in the doghouse, they may not care about it that much. emily: do they care about it? >> i was going to say the same thing. they are rolling out a cryptocurrency under investigation, so they are not super concerned this will violate any other issues they are dealing with. emily: there has been brainstorming about how business could work integrating libra. what has been discussed in terms of how they could operate? >> facebook one say anything yet. emily: it doesn't exist. >> that helps too. we all have to speculate. imagine i buy something online and i getting email with the receipt and a customer service number. imagine that was built into the messaging service you already
use. you get your receipt that way. you want to talk to customer service, you can do if they are. you can see the potential for the commerce play. i use the word potential purposely because it is not used in the way right now, but that is how we might use it in the future. emily: many unanswered questions. we will see how facebook answers what it can in july. thank you both. coming up, in amazon's quest for e-commerce domination, a push into beauty. how amazon plans to take on the likes of long time beauty players, next. this is bloomberg. ♪ ♪
voated to ban the sale of e-cigarettes in stores and online to san francisco addresses. this will have a big impact on juul, the biggest maker of e-cigarettes in the united states. they are working on a ballot initiative for november that would regulate e-cigarettes, but reverse this ban. they just need enough voters to agree. we will continue to cover this. it has to go to the mayor for her signoff. that could take 10 days. potentially a big move by the city of san francisco to ban e-cigarettes in the u.s. and around the world. ok, meantime, amazon making waves in beauty. monday, amazon launched a professional beauty store to "offer professional stylists, barbers a customized selection." and ulta took ty
a hit. how big can amazon's ambitions go? joining us now is our guest with a buy rating on ulta and amazon. anthony, what is your take on this? how bad is it for the beauty companies? >> i actually have an hold rating on ulta and buy rating on mazon. this is more of an issue for sally then ulta. sally is selling beauty supplies to barbers, salon owners. ulta, that is not their usiness. it is a woman coming in to buy her makeup. really see this as an issue for sally beauty than i do for ulta. emily: how much of an
opportunity is this for amazon? can they step up? >> amazon is prioritizing high-margin businesses. if you look at this industry, $87 billion in the u.s. every year for this industry, one of the highest margin e-commerce businesses out there. they need brands to be matched p with others. that is why they are going with b2b first to establish that. this is a high-margin business. if they are able to penetrate, it can help profit growth. emily: anthony, is this something amazon can pull off? some makers of beauty products would say amazon's checkout experience is fairly transactional. when you want to buy beauty products, you are looking for more. can amazon deliver the experience of a beauty product, which can get complicated speaking from the perspective of a woman, or will it be another amazon checkout?
>> i think that is a valid question on the business to consumer side. amazon is good at replenishment. if i know the type of foundation or lipstick i always buy, i can order that from amazon, but when you're talking about discovery of new products and new brands, i think that is tougher for amazon. there is also the question whether these high-end, prestige brands are willing to sell to amazon, which will not necessarily honor manufacturers suggested retail price and will not offer the in-store experience you get at ulta and department stores. emily: i wonder how much ompetition there is there from an up-and-coming set of
companies. >> it is a fragmented market. everybody has their own edges, but ulta beauty have strong physical properties. that is one place where amazon would take time to match up. first they will learn some lessons going through the b2b, doing what they are good at, replenishment. the fragmented market is the opportunity for consolidation, at least from a long-term perspective. emily: anthony, what will you be watching for as this rolls out? >> the main thing is whether they use the b2b strategy to move into b2c. if they move to b2c, do they get those high-end, prestige brands?
emily: this is "bloomberg technology." i'm emily chang in san francisco. now to following in cyber warfare between nationstates. the trump administration is saying russia, china, and iran are all trying to sway public opinion ahead of next year's election, in some cases through social media. the u.s. is ratcheting up pressure on iran with sanctions and a cyber strike. according to a researcher, iranian hackers have stepped up attacks against the united states in recent weeks. that includes attempts to infiltrate banks and government
agencies through their computer systems. for more on these attacks, let's get straight to the source with sandra joyce, she joins us now from washington. what exactly is the new activity you have identified from iranian hackers on u.s. targets? sandra: we're seeing a barrage of attacks targeting multiple sectors, financial, government, and also media, education, and likely several others. emily: what are the objectives here? sandra: the objective of most spearfishing efforts is to establish a foothold in a network. it could be just to collect information or intelligence, but what is disconcerting is that these tools or techniques work precursors toward destructive attacks we saw in 2018 by the same actors.
this could be a look at just trying to get information, but it is likely that it is also a precursor to secondary actions. that's why companies and organizations around the world need to be on high alert with a high level of vigilance. emily: this is just days after the iranians shot down a surveillance drone. the president called it a physical attack in retaliation for iran. but did it prove a cyber attack on iran's missile and defense capabilities -- could that slow some of these other cyberattacks coming from iran? sandra: what we know is that cyberattacks are a means to actually carry out the national security objectives of nationstates. what we can expect to see going forward is iran continuing to use cyber as an asymmetric method in the face of escalating tensions between the united states and iran.
emily: in the group, you call out apt33. what do we know about them? sandra: it's the same group that launched destructive malware against international industrial control systems in december 2018. they are a group that has a history of using destructive malware to carry out nationstate objectives of iran. there have been other groups also from iran that are carrying out the same type of spearfishing attacks, things that are going to help them get a foothold into networks to possibly take it to the next level. emily: so how vulnerable would you say u.s. infrastructure is right now and which parts of u.s. infrastructure are most vulnerable? sandra: there are 16 different
industries and each one has strengths and weaknesses. what we are looking at is a warning was put out to all u.s. institutions saying they should be on the lookout for heightened activity stemming from iran in response to a lot of the tensions that are going on now. emily: we certainly don't know everything that the u.s. government does in cyberspace, but who has better cyber capabilities, iran or the united states? sandra: clearly the u.s. has more sophisticated capabilities, but that is not to say that other nationstates with their capabilities could not make a real dent in the infrastructure of other countries. so we shouldn't consider it less of a threat. we are looking at increasing sophistication from our rent and the willingness to use cyber
tools for destructive and espionage purposes to carry out their angles. emily: how concerned are you, based on the activity you've seen over the last few days, about escalation, given that we are going into a pivotal u.s. election cycle? sandra: what we are seeing is a great interest in multiple countries into the outcome of elections, even china has taken steps to look at elections within asia itself, from what we have observed in cyber activity. the intent to keep tabs on election activity is certainly present. whether or not that activity will interfere with the outcome is another thing. we recently saw that arend was trying to impersonate u.s. candidates, trying to create an authentic accounts to sway public opinion. in that way, they are attempting to influence the outcome of
elections. emily: sandra joyce, thank you so much. sandra: thank you for having me. emily: the pentagon is preparing for the rollout of a controversial cloud service program. it is being challenged by oracle in court, according to a copy of a pentagon memo obtained by bloomberg news. chris joins us now from washington, d.c. what is the status of this contract as it stands right now? >> great to be with you. right now, the pentagon has announced that the pentagon will be moving to a joint enterprise defense infrastructure sometime in late 2020 two fiscal 2021. the may memo from the defense department cio told federal agencies to put current cloud
contracts on hold until such time as the defense department could assess the requirements for the joint enterprise defense infrastructure and other cloud programs. emily: competitors have challenge the fact that the pentagon is trying to awarded to a single player, most likely amazon. how strong is oracle's case? chris: oracle has made the case that the pentagon biased the solicitation toward amazon web services and specifically notes relationships between three former defense department employees, one of which had done consulting work with amazon web services prior to their stent at the pentagon, and to who had received officers of employment
and had not recuse themselves. however, the defense department is separating or attempting to rebut these criticisms, claiming that the defense department has made these decisions later on in the process, that individual questions were not central to the decision-making here. emily: we will be watching to see what comes next, as the pentagon expects to issue the contract for jedi, no matter what the outcome of the proceedings is or whether it's been delivered. thanks so much for weighing in. coming up, the high-stakes world of plant heists? redwood trees. that's next. this is bloomberg. ♪
emily: when it comes to poachers, you might think of people illegally hunting rhinos or elephants. but in california there's another insidious approach and one you might not expect come were talking about thieves who plunder seeds and plants from national forests. they're targeting flora, and park rangers are turning high-tech to thwart the thieves. using hidden cameras and more. sarah mcbride wrote all about it this week in bloomberg businessweek. what is happening here? sarah: there are so many thieves hitting up our national parks and they are taking everything from the redwood burls to cacti and ginseng in the southeast. now the rangers have no choice,
they have to use whatever they can to fight back, and that includes tech. i just wrote a story about redwood thieves who were caught using a network of hidden cameras and saguaro national park in arizona, they are injecting microchips into the cacti to try to deter thieves, and in those parks in virginia and north carolina, they are dying the roots of ginseng so if they find ginseng for sale, they can immediately identify where it came from. and i had no idea that trees had dna. three years ago, some people were apprehended and convicted of stealing maple trees in the northwestern united states, convicted in federal court, based on evidence of the tree's dna. they can take a tree or piece of wood and match it to a tree
stump in a forest thousands of miles away, and they know this piece of wood came from that trees. emily: so how do they track down the thief? >> in the case of the maplewood, it is often sold for guitars and things like that. emily: these are the cacti you see in pictures of the desert. >> the iconic woody woodpecker. emily: what is happening with these? >> you can get a surprising amount of money, $100 a foot is the going rate for those. if you have a 10 foot cactus, that is $1000 right there. the rangers decided to implement a program of micro-chipping there cacti. they go around with the special guns and inject chips into the cacti, and then they can splice
over any cactus and see if it came from the park. they think it has been enough of a deterrent that people have stopped, or is not on the same scale as it was before, poaching those cacti. emily: so there is a role for social media here. sarah: in ways, it is hurting the park. there has been a spate of the theft of little succulents that grow on cliffs. they have caught thousands and thousands of those that people are trying to smuggle to asia where they have become a big thing. that's because of things like instagram feeds, where everybody now wants these little succulents. they can also catch people more easily thanks to those social media feeds, so it cuts both ways. emily: so we should assume that
the brother is watching us at the national parks swimmer going on our peaceful hike through the redwood forest. sarah: unfortunately the surveillance reaches even into our national parks. emily: so what is next, we are talking about a national treasure. how well do park rangers think that technology can help in cracking down on these practices? sarah: it's a cat and mouse game. if they didn't have the hidden cameras, let's take out somebody in the act of accident trying to steal these pieces of wood, which are hundreds and thousands of years old, there is no way they could get that person. now they have a decent chance of getting them. so i think the odds are good. emily: last week you talked about tech companies chasing down bird science and this week
it is cacti. what is next? sarah: actually, it's burning man. look for my burning man story. emily: sarah mcbride, thank you so much for joining us. hear more from our editors and reporters every saturday and sunday on businessweek on bloomberg television. when you are one of the three richest men in the world, you might not have a lot of regrets, but bill gates says his biggest mistake ever came in mobile phone software. he told david rubenstein in washington that microsoft lost out to google and launching a mobile operating system to compete with apple. >> we missed being the dominant mobile operator by very tiny amount. we didn't assign the best people to do the work. the biggest mistake i made in terms of something that was clearly within our skill set, we were clearly the company that could have achieved that, and we
emily: one of hollywood's legendary studios is getting its first female ceo. she's been named to take over at warner bros. she is currently president at bbc studios america. it was a milestone morning for spacex. the company launch its falcon heavy rocket for the u.s. military early tuesday. elon musk described it as the company's toughest mission yet. the rockets delivered 24 satellites while its twin boosters were back on earth. joining us to discuss it is just an. what was so tough about this particular mission?
justin: it's the first mission at spacex that flew the falcon heavy at night.
secondly, they had three different orbits they had to take the payload two. you've got commercial customers, nasa, the air force. they were essentially making three stops and it kind of turned into a delivery truck of sorts. it was tricky in getting the orbits right, very high paying customers an important cargo. then the landing as well, they did the boosters on land, which worked out. the main engine on the drone fee did not work out, so that has more work to be done. emily: so it was mostly successful except that the center core failed to land in the atlantic ocean. what went wrong
there? justin: it's hard to say at this point. the last time i tried it and it
didn't work there was some wind involved. it could be the weather. it's probably not a huge deal. in the larger scheme, i think elon musk was probably nervous because this was an audition of sorts for future government work. i think it is a case where there are four companies looking for that, the air force will probably choose two of them, and there is stiff competition involved there. it's a very important revenue stream for much of 2020. i think that was a big part of the issue last night for spacex. emily: going forward, what does it mean for spacex? elon musk as usual has set some very ambitious goals. he plans to send a human into space not long from now. justin: the plan for a human is this year. i think last year -- it showed we can get two separate orbits on a flight.
the industry is moving that way. you've got to be able to do that. different customers want to be different places. i think it was important that they show that they can do that and they also showed that it is with the largest current rocket that's flying. emily: how does this position spacex in the private space race with the u.s. and other countries? justin: they're looking for stiff competition as well as with lou origin which has been interested in some air force work as well. it's a solid revenue stream. the air force is always putting up national security packages. that's one of the things they all want to see develop. then you can do other things,
you can learn a lot from that type of work. so it is really important for spacex and the others and it will be hard competition. emily: just and will continue to cover that for us. thanks so much for joining us. that doesn't for this edition of "bloomberg technology." we are livestreaming on twitter and follow our global breaking news network tictoc on twitter. this is bloomberg. ♪
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