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tv   Bloomberg Technology  Bloomberg  July 30, 2019 11:00pm-12:00am EDT

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emily: i'm emily chang in san francisco and this is "bloomberg technology." coming up in the next hour, apple coming in with third-quarter results. revenue from wearables passing the ipad for the first time. and another first government revenue from services hitting an all-time record commit though still below estimates. sales in china not as terrible as some had feared. we will have all angles covered. plus, u.s. sanctions start to bite. the chairman of the chinese
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telecom giant huawei says there has been a dramatic slowdown in sales growth in the midst of the trade war. in exclusive interview, he hints at even tougher days ahead. capital one shares drop after a data breach. the company saying data on 100 million customers hacked. all of it stored on amazon web services. a former amazon employee has been charged. but first to our top story, apple shares spiking after hours after reporting third-quarter results. revenue topped analyst estimates. apple saying it remains optimistic about potential sales of new iphone models set to hit the market in the fall. for more on apple earnings as they are unfolding, we are joined by max chafkin from bloomberg businessweek, and we also have the sin of this trust portfolio manager with as.
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walk me through this. iphone sales missed estimates, services missed estimates, the forecast beat. what about all of these other indicators? >> it is an interesting report. if you would have told me they would have missed on both services and iphone revenue, i would have said, they were not going to beat on top and bottom line. wearables was a big plus. they also used about $21 billion of cash on the quarter to repurchase shares and increase the dividend. they did some other things to kind of help along which initially you would have thought would have been a tough quarter for them, at least based on how they missed estimates for revenues and also services. emily: we have the president warning that the trade war may not get better anytime soon. that could directly impact the iphone max. if tariffs come into play on the iphone, what do they do?
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the reality is, for years, apple has in counting on expansion, selling iphones in china. it has been able to do that for some extent, but as we are seeing, the numbers just aren't there, and the outlook is not great. you have the possibility of tariffs, further barriers. also, these chinese companies will be pushing harder in the domestic market in china. at the same time that apple is trying to get in there, and tushie the government helping those companies along. so there are a lot of quote unquote headwinds for apple. good news is that the services thing, even though it is not exactly where they would like it, it is pretty strong. is that a place where iphone revenue, this has been an iphone company for years, it is now half of apple's revenue. it is probably a good sign because we have heard tim cook over and over again say that they want to increase services
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revenue, and that is finally happening. emily: apple ceo tim cook speaking now saying he is thrilled to see a return to growth. dan, you own a couple hundred thousand shares of apple. health concerned are you about this tariff issue? dan: as max was saying, the ,ariff issue is a double whammy you have retaliatory tariffs in regards to certain things like glass covers, sensors that are shipped into china that could be potentially on a tariff watch with the chinese government. the big question going forward is just what does apple do? do they try to raise prices, they already have extremely high average selling prices compared to the competition, or do they just absorb the tariffs into their profit margin? how does that work into the
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international expansion the theme where you have average incomes in countries like india and china that are a fraction of what they are here in the u.s.? it creates a conundrum for apple going forward. it is an issue in terms of trying to model out what will happen with apple with these offices. emily: meantime, they want to push the services business, they still hit a record, but in order for their services to grow come at a have to keep getting new devices into the hands of customers, right? yes, it is a circular thing. on one hand, services are replacing iphone sales, but on the other hand, you cannot have iphones.without more is apple making all this money in services revenue because good?services are really or is it because they have set up this business where you kind of have no choice? if you have an apple and you have to buy an app, that is recurring revenue in apple's
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pocket that will never go away. what we ared, seeing in terms of revenue growth, is it really innovation or more like a very powerful, mature company flexing its muscles and collecting revenue? and i think depending on what you think the answer of the question is is how you will value the stock. if you see lots of growth ahead, it will be much more optimistic. one analyst is saying that trading and other programs helped iphone sales in the last quarter. ,our investors across big tech dan. how concerned are you about big tech with regards to apple and other big tech companies, with saying it is opening an antitrust investigation into facebook, and the d.o.j. looking at big tech in general.
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dan: in the 1990's, you had investigated, in kind of a similar situation of being a monopoly. it came out as a low fine. million ofwhat, $200 a fee, and all of a sudden facebook pays $5 billion. ,so it is really unprecedented and it is something to be concerned about. but quite frankly, it doesn't seem like the street is that word. they had a good quarter, good revenue advertising growth. but otherut there, than paying a fine, i just can't see them breaking google or up.book, or even apple what are you going to do? it just seems like something that is out there, like a black cloud.
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i don't really think wall street believes that the federal trade commission or the department of justice will come in and break this up. emily: we are expecting new iphones to be unveiled in september. our colleague mark gurman has reported these will be incremental upgrades, not a design overhaul. they are going to bring in more revenue in general than we thought they would. max: and that is a good sign if you are an investor i think the real excitement is 5g. have been talking about apple going 5g next year. that could open up a lot of territory in terms of new territory, and you experiences. we know maybe are apple was becomes more useful. the watch has been doing really well. this business is bigger than the ipad right now. it will be interesting to see if 5g can bring it all together somehow. emily: tim cook saying the app
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store up in the double digits. this is significant as they try to grow their services portfolio. he is saying monthly viewers on the apple tv app are up 40% year over year. jan, which service are you most excited about to come this fall? is it apple tv plus, apple news applecart, apple arcade? , dan: when you look at the service segment, it is kind of a third, a third, a third you have the apps. they are mostly gaming. you have apple care which nobody ever really talks about, where it is this warranty on your phone, where if you drop it, they will replace it or fix it. then there is apple tv. they came out with a new package on their apple tv, it was met with not too much of an applause compared to say netflix, amazon, disney and fox. spaces ever-growing.
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you see more people writing apps, more gaming. where the action is, this music, the tv. that is what everyone wants to talk about. they have to decide if apple wants to spend more than a billion dollars in content, try to compete with netflix in bringing out shows. i think that is the more exciting component on the service side, seeing what they will do with that on the entertainment side. emily: we will be speaking about huawei a lot later in the show. huawei is a leader in 5g. while it is a big competitor with apple in the smartphone business and has become sort of pawn in the u.s.-china trade war. apple isn't putting out a 5g phone this year. we expect that next year. does that mean apple will be behind? dan: that is always the concern, that huawei or maybe samsung will be ahead of them. but as max was saying, the next cycle in the phone business is
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5g. the possibility of a foldable phone is being talked about going into 2020. as you mentioned before, the phones expected to come out this speak arei11 so to not going to be viewed as being overly dynamic and forcing people to upgrade, so that roadmap to 5g, and also that roadmap to 6g, with the acquisition of the modem business from intel, all are very interesting for apple going forward. emily: tim cook confirming on his call that cart is launching in august. they are doing that in partnership with goldman sachs. we will continue to monitor headlines of the call. dan morgan, thanks so much for stopping by. max, you are sticking with me. chipmakers reported earnings. shares fell after the company
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reported second-quarter results. earnings-per-share fell in line with analyst estimates but the company gave a softer third-quarter forecast. coming up, huawei is caught in the middle of a trade war and president trump's national security concerns. our exclusive conversation with the chair of the chinese telecom giant, next. this is bloomberg.
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emily: huawei continues to face the fallout of the trump administration's attempts to thwart it. and we are beginning to get a picture of what that means. while his sales growth dropped dropped's sales growth
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in the first half of the year. tom mackenzie sat down for an exclusive interview with the huawei chair on the company's shenzhen campus. they talked about how they can survive without google's android operating system. mr. hua: we don't know when the u.s. will make a decision on android, and one that season will come, so we have to make preparations for our products. we will evaluate our strategy for the overseas market. if we are not able to use android for our new smartphones, we have the ability to develop our own operating system and ecosystem to become the basis of our services to the customers. tom: give us a sense how much you have had to change your supply chain to mitigate these pressures? is there more to be done? mr. hua: the entity list put into place by the u.s. was disruptive to our supply chain as we had already made plans to use components from the u.s..
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but u.s. suppliers suddenly stopped supplying us, so we had to make adjustments to our supply chain, including our process of purchasing, manufacturing, and living products. we will do the adjustments to our supply chain. we will change to other suppliers and use our own chips for the core components. i think the damage to the u.s. suppliers is even bigger than it is to huawei. we will have to manage continuity internally. the damage to the u.s. supplier is direct as they lose a customer. if the u.s. removed huawei from the entities list, that would be a solution. tom: what impact are you seeing on demand for your 5g equipment given the u.s. campaign to block access to huawei? mr. hua: although the u.s. has been launching a campaign among its allies, it is up to each country to decide its partners
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based on its own development demands telecommunication , demands and carrier infrastructure construction demands. i think there might be some impacts in places like australia, but there are others who are willing to work with huawei. tom: when it comes to components, you have said that you are still blocked from some of your key suppliers. can you give us clarity on of suppliers are, and the success have had, or not, on finding alternative suppliers to fill those gaps? mr. hua: we might have some components we can't buy from the u.s., but we will use our own components to supplement. smartphone operating systems like google's operating system and ecosystem haven't resumed business with us yet. we are working to find a way to patch this hole. we hope to see good news, but if there isn't any, we will try to enhance our own capabilities. tom: do you expect huawei to be
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conversations when trade negotiators meet in the next few days in shanghai? will they be discussing huawei, and do you welcome the backing of the chinese government for your company? mr. hua: huawei is purely a company. when two countries talk, they talk about topics. in the talks between china and the u.s., they will talk about big topics. for us huawei only needs to do , its own job, like what i just said. we need to patch up the holes, manage continuity, as well as ensure product delivery. we do not sell to the u.s. what we do care about is doing a solid job in making sure the products are delivered to our customers. huaweithat was the , speaking to hua bloomberg's tom mackenzie.
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here to continue the conversation, om malik, a partner at true ventures, and max chafkin. he's saying, we will either get a good deal or no deal at all, which can't be good news for huawei. max: no, it is not. telecom companies, almost more than any other company in the economy, are dependent on these global supply chain. while he is talking about le in thethe ho android system, that is a big hole. lots of powerful consumer electronics companies have tried developing their own systems besides android, and it has pretty much been unsuccessful. microsoft is probably the most valuable company in the world, the windows phone isn't anywhere. samsung has tried, and i think it is really hard to see huawei getting it together quickly. i think they need a deal. om: i think this is a short-term problem for huawei.
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in the long term, they realize the u.s. to get off dependency on semiconductor components and software. i think that is one of the main huawei is going to try to create its own operating system. in their products have not gone down, they have gone up. which tells you that nationalism is not in their favor right now. that cannot be good for guys like samsung. emily: you are saying that no matter how the trade war resolves, whether in the u.s. or china's favor, that the damages are ready done, that chinese companies will focus on being more self-sustaining, more self-sufficient, without relying on u.s. operating systems. om: exactly. they are one of the largest tech markets right now, so it makes sense for them to not be dependent on others. they have the whole 2025 white paper out there.
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they want more freedom further sector, i think that has become even more critical for them after this trade war. emily: so it doesn't matter if the trade war ends in three hours, months, years. max: i agree. but it is a long project. 2025 is a long way away. maybe not in the scheme of national planning or whatever, to take someng time for china to get its modems and software to where these u.s. suppliers are now. says, in the as om long run, if chinese computers can only by chinese phones, huawei will grow at it will hurt apple, samsung, and all these american companies that have really counted on china as an export market. emily: i am curious about your conversations with folks in the silicon valley tech community about how much of a threat huawei actually poses.
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i have spoken to ceos who don't believe huawei poses in the threat at all. om: it's the same thing, in the late 1990's, everyone thought linux would destroy microsoft, and it didn't. but it took away a lot of growth opportunities. i think that is what huawei is. there is really little growth opportunities for u.s. telecom companies out there the world, because huawei, either because of its pricing power or because of its subsidizing, it is making inroads in africa, places like sri lanka, southeast asia. these were traditionally american markets. these are no longer american markets. so in a long-term, this is very detrimental to the u.s. tech sector. we have to remember, u.s. companies have to think in three-month increments. china is a country thinks in terms of 10-year and 20-year
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national plans. i think it is a whole different way of thinking about the future and china, and i think that is a challenge have as silicon valley, and technology sector. emily: we will talk more about this a little bit later on in the show. bloombergs max chafkin, thank you. om malik of true ventures, you are staying with us. elon musk can't stay off of twitter. what the ceo is tweeting about now is regards to production numbers,. this is bloomberg. ♪ bloomberg. ♪
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emily: an elon musk tweet about tesla production is raising questions again. he tweeted that he plans to produce 1000 solar roofs per week by years end. the problem is, musk's tweets on production numbers need preapproval under his agreement with regulators. tesla nor the f.t.c.
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have commented thus far. first quarter profits that missed estimates for nintendo. nintendo says operating income fell about 10%. it left its full-year forecast unchanged. investors callers currently underway. ceo tim cook given a glowing review of how wearable devices fared in the second quarter. more on apple, coming up next. this is bloomberg. >> an absolutely blowout quarter for wearables. where we had accelerating growth of over 50% and a new high water mark for services, where we sat and all-time revenue record of $11.5 billion. when you step back and consider wearables and services together, two areas where we have strategically invested in the last several years, they now approach the size of a fortune 50 company. ♪
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emily: this is "bloomberg technology." i'm emily chang in san francisco. apple shares in the green after reporting third-quarter results. services seemed to be the main theme of the quarter, a fifth of total sales for a whole. the call is still underway, with apple ceo tim cook expanding on the company's plan for the new apple credit card being launched with goldman sachs. tim: transit integration is a major driver of a broader digital wallet adoption and we are going to keep up this push to help users leave their wallet at home in more and more instances. on a related note, thousands of apple employees are using apple
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card every day in our beta test, and we begin -- we plan to begin the rollout of apple card in august. emily: still with us, om malik. you have been to every apple event for the last 20 years. so, what is your take on the services business and how do you expect it to evolve? om: i'm surprised how fast it has grown. i am also surprised how mediocre many of its offerings are, even now. apple music versus spotify. you can see the glaring differences. apple pay is a great service. clearly better than anything google has to offer in the market. they are like kind of middle-of-the-road in their services, but they have such a huge platform that they can make a lot of money doing what they are doing with services, even if they are just mediocre or middle-of-the-road. sort of like how microsoft used to make money by offering
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products which were good, but not great. emily: are there any products you think that are good and can become great? om: i think apple pay is a great service. i think it can get better and better with time as the adoption grows in more places. emily: how concerned about you are about johnny ives' exit? and as iphone sales plateau or whatever happens, the device itself becomes less important to the overall portfolio, what the new apple looks like. om: i think everything changes. we all grow out of our roles or importance in a company or in life. i think that is the case with johnny ives. i think he along with steve jobs created a a portfolio of amazing products. the products that have become iconic and society changing.
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but now, he wants to do something else. apple has to kind of move on too. apple is becoming more of a mature, older company which is not as much as a revolutionary the way it used to be. it is a big company, a trillion-dollar company. it has to behave like one. i talked to you about this previously. whether it is johnny ives or someone else, people will come, people will go. this company has to figure out a way to last longer. sort of like how it goes from being apple of steve jobs to apple of the future, like walt disney of walt disney to disney company of today. i think that is a transition apple needs to make. emily: do you think we will see apple continue to innovate radically in hardware and/or software, or no? om: radically is a very strong word. i think they will try a lot of interesting things. they still have the design dna. the ux dna. but you know, those days of taking wild gambles probably are not going to be there as much,
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mostly because steve jobs could get the company to bet big on a decision. sort of like getting rid of the cd-rom, operating on the on usb. those things were pretty radical at the time. we forget how much of an outrage there was around those decisions. he could do it because he was steve. i think now they have to play it a little bit safe. emily: you really closely follow the telecom industry. what do you think about the choices that apple has made, not investing in 5g this year? we are expecting it to come next year. as huawei is being penalized by the united states and that could thwart its efforts to grow its 5g business. om: i think 5g's rollout in the world has been vastly overstated. i think it is a much slower rollout than most people realize. i think right now, you are seeing the war of words between
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t-mobile and verizon. the rollout of 5g is happening in two, three tiny markets in the u.s. worldwide too, it is a much slower rollout. apple has time to get it right. apple has the time to get the iphone for the 5g world. remember, there is a huge battery overhead with 5g. no one talks about that. all these companies talking about 5g, when their battery starts running out in one hour or so -- emily: they will not care about 5g. om: samsung did the foldable phone, and how did that work out? i think being early is sometimes not the best decision. emily: historically, apple has not been first. they say they are the best. om malik, thank you so much for stopping by. always good to have you on the show. well, what language should a car speak? 5g or wi-fi? the answer could determine who will lead the way when it comes
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to developing self-driving cars. billions of dollars could be at stake, so could thousands of lives. bloomberg's ed ludlow has the story. ed: cars that can talk to each other, interact with traffic lights and even see around corners. the advent of 5g could make these real, bringing faster speeds and greater bandwidth needed for smart traffic systems and truly autonomous vehicles. but it is not the only option for connecting cars. it's up against a more established wi-fi-based technology. there is a debate about which is better. the choice is between the existing wi-fi standard called or dedicated short range communication, or c-b2x, celluar to vehicle to everything which would eventually use 5g networks. china was the first to make a decision favoring cellular technology for his cars. with recent developments in 5g, that could be handing china the early lead. >> their focus is leaading to this real time-to-market advantage.
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and frankly, they will be saving hundreds, if not thousands of lives much sooner than we will determine which standard that is best for the long-term roadmap in the western world. ed: in october, china ended the use of c-b2x. gave it a dedicated band of spectrum. in the u.s. and europe, the spectrum issue is unresolved and there is a split on which technology to use. --en link the us settling settling to a standard matters. if the federal government mandated a technology today, it's estimated up to 8.1 million car crashes and 43,000 deaths could be prevented. how will the technology differ? both are designed to connect cars directly to other vehicles and the infrastructure around them. but the cellular tech could harness the 5g network's wider range and greater bandwidth, and its lower latency. >> that one millisecond delay in latency in 5g to let you know there is a car coming around the corner is going to be critically
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important. today, with 4g, that might be 10, 20 milliseconds. it is crucially important to the safety levels. ed: the wi-fi-based standard has low latency and backers argue it is a better option because the technology is mature and ready for deployment now. but supporters of the cellular tech say it has superior range and is more secure. bison is a u.s. e.v. startup that will build its car in china and bring it to market with basic self-driving capabilities. >> 5g will enable vehicles to talk to different infrastructure. it will enable vehicles to talk to each other. autonomous driving can use up to 1.5 terabytes of data per hour. that data needs to come into the vehicle and leave the vehicle. ed: it can evolve with each new generation of cellular networks starting with 5g. it will be as simple as switching the modem. critics of the wi-fi standard say that technology is outdated and not appropriate for the cars
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of tomorrow. so, which will prevail? 5g is now backed by a trade group representing more than 100 car manufacturers and chipmakers, including qualcomm. >> vehicles are becoming more and more autonomous, relying on cameras and sensors. once we start blending in both 5g and cameras and sensors, we get to see a far more transformative experience. ed: the eu commission plan was defeated in july, opening the door for a 5g standard supported by audi and bmw. in the u.s., the trump administration has put off taking a decision, but ford is not waiting for washington. in january, the carmaker committed to deploying c-b2x in its cars from 2022. currently, general motors is the only u.s. carmaker promoting the older wi-fi standard. bloomberg new energy finance says in the long-term, the u.s., korea and japan will adopt the cellular option as they aggressively deploy 5g networks. for now, the western world has left it to automakers to fight
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it out over which standard to adopt. ed ludlow, bloomberg news, san francisco. emily: coming up, one of the biggest data breaches in history. we will give you the latest on the capital one hack that compromised the data of over 100 million customers, next. this is bloomberg. ♪
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emily: cryptocurrencies took center stage on capitol hill this week. the u.s. senate banking committee held a hearing tuesday to discuss regulatory framework for crypto and blockchain. planss facebook's libra
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continue to draw backlash. while the conversation circled around regulation, jeremy allaire the only industry representative to testify. caroline hyde spoke to him following the hearing. take a listen. jeremy: there were certainly openness to learning. i think the increased global awareness of this asset class, the movement of very significant scale internet companies into the market is bringing a lot more attention both from regulators and from policymakers and lawmakers. in general, i think i saw a readiness to learn. i think there was very real discussion around, you know, is the u.s. missing out on innovation in the sector? are there other policies we need to think about developing to more clearly define regulations in the sector? so overall, i think positive and it is very encouraging to have a lawmaker attention on a critical issue like this. romaine: did you get a sense at
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all as to whether lawmakers may be prepared anytime soon to move forward on some type of legislation that will provide a little more clarity to the legal structure of the sort of blockchain, crypto space? jeremy: i think we are seeing building interest in legislative initiatives that can better define digital tokens or digital assets. we have seen the token taxonomy act put forward in the house. hopefully, we will see that also sponsored in the senate. but i think things like stable coins or stable value tokens like u.s. dollar coin and libra, the increase in proliferation of digital asset projects outside of the u.s., the movement of companies to leave the u.s. and projects to get started outside of the u.s. is definitely getting people's attention. and i think it is going to lead to ultimately legislative initiatives that chart and both
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ensure there are appropriate safeguards for investor protection, but also clarity which is much-needed to allow the technology and industry to flourish. emily: that was circle ceo jeremy allaire. capital one shares tumbled after a massive data breach expose the personal information of over 100 million u.s. customers. this included social security numbers, names, addresses and other sensitive data dating back to 2005. after receiving a tip, authorities arrested and charged a former amazon web services employee who boasted about the hack on twitter. you are watching surveillance video obtained by bloomberg news of the law enforcement rate on the suspect's home. while over 140,000 social security numbers were accessed, capital one said it was unlikely the information was used for fraud or disseminated by the individual. following the news, the new york attorney general says her office plans to investigate the breach.
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joining us to discuss, bloomberg's jennifer surane. this case seems really unique. first of all, they have already got someone in custody. what exactly happened here? jennifer: very unique actually. one of the unique aspects was how capital one found out about this breach. it really came through one of these anonymous tip lines that the bank sets up to ask hackers to reach out and let them know of these vulnerabilities. that was one of the unique aspects. also, how quickly they responded. that email came in two weeks ago, and two weeks later, you see them not only disclosing it to the public, but an arrest. now, this lawsuit has been filed. so it is pretty unique in a lot of different ways. it will be interesting to see how maybe some of those unique aspects play into how the public
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receives this, the reputational damage, that sort of thing. emily: the person who was arrested, paige thompson, already charged with computer fraud and abuse. she is a former amazon employee. this data was stored on amazon's web services. how did the suspect get a hold what did she and do with it? jennifer: so, she was able to go in through a firewall that capital one said is not being configured correctly. that could mean a lot of different things. when we have heard, is you have to be pretty sophisticated to pull off this type of hack. the way a lot of these cloud services providers work is they provide kind of the nuts and bolts of the infrastructure you need. then, companies are supposed to layer on on top of that the kind of security and locks and keys that keep the data secure. capital one was saying this is not because we are on the cloud, not because we are a major user of amazon web services. this could have happened if we had stuck to our old physical data centers, that sort of thing. it's definitely interesting.
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implications for whether or not banks can continue to push the using the cloud to store their data, if not slows this down. emily: capital one saying it is unlikely the information was used for fraud or disseminated by the individual, so why did she do this? jennifer: yes, that is the question i think we will get more clarity on as this case rolls along. normally, we actually don't see this data hit the dark web or get monetized, the word people like to use. it takes a while. after a big breach, consumers are actually really on high alert. they are checking their credit reports, setting up free credit monitoring. so hackers actually don't like to put it out there immediately to sell it to fraudsters who can use it in different nefarious ways. so it is not totally unusual that we don't see it yet. the unusual part is they already know who did it and it does not seem like she was able to monetize it yet. it will be kind of interesting to see how that affects the regulatory aspects.
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like you said, there has already been investigations launched by different governments. so it will be something to keep for sure. emily: interesting. we will see how this one evolves. amazon saying aws in particular was not compromised in any way, and functioned as designed. jennifer surane, thanks so much for that update. still ahead, u.s. sanctions have taken a bite out of huawei's revenue growth. we will find out why that chinese company is warning about tougher days ahead, next. this is bloomberg. ♪
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pres. trump: china is dying to make a deal with me. but whether or not i will do it is up to me. it is not up to them. emily: president trump on tuesday morning after he lashed out on china on twitter saying, if and when i make a deal, they deal they get will be much tougher than what we are negotiating right now or no deal at all. the outburst coming as secretary steven mnuchin and ambassador robert lighthizer are meeting
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the chinese delegation in shanghai to try and hammer out this deal. joining us to discuss, tom mackenzie, who is outside huawei headquarters in shenzhen, china , where he interviewed the chair of the telecom company caught in the trade war's crosshairs. tom, fascinating interview you did earlier. talk to us about just how grim he was about the outlook for the company going forward. tom: yeah, it was quite interesting that liang hua, the chairman, was relatively frank about their prospects. he talked about the number, the earnings number they got for the first half, up 39%. the key point, and our bloomberg colleagues have been crunching the numbers on this, the earnings day amassed after the blacklist was put in place, that entity list by trump in may. since then, earnings fell from
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39% in the first quarter, to about 13% after that blacklist. really, liang hua was pointing that the pressure remains on the company particularly when it comes to its consumer division, which makes up more than 50% of its revenue. they did pump out about 118 million smartphones in the first half. compared to 200 million for the whole year of 2018. so they are on track to be that number, but still, when they come up with their new smartphones, including a foldable phone they expect to launch towards the end of this year, the question is whether or not they will get access to google's android platform. the operating system. don't, it is clear they to see a reduction, particularly in international sales of their smartphone. the consumer division makes up 50% of the revenue. in terms of 5g, he says, look, we are still roaring out contracts. we have signed about 50 5g contracts. they seem to be less concerned about the network side of business. but enterprise is a problem. they don't have access to intel's chips. that part of the business. and then, again, the consumer division facing pressure.
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emily: so, how is president trump's fresh lashing out at the chinese as trade talks are happening, how is that the received in china right now? tom: well, to some degree, this is a move we have seen before. trump will tweet before negotiators go in or during negotiations. if you take it at surface level, it shows that the u.s. administration is not becoming any more flexible in terms of these negotiations. he repeated, as you have heard, he wants a proper deal, a good deal or no deal. the u.s. has said they want structural changes, changes in terms of intellectual property. balancednt, and more trading relationship, and china has said, you have to meet us halfway. you have to make some concessions. china reiterated the three points it wants, including the removal of tariffs, a more balanced deal, and less onerous demands in terms of purchases of u.s. agricultural products. so it seems like the goals between the two sides remain vast. there were some jockeying leading up to this.
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the chinese side has said to its companies you can look to start buying u.s. soybeans. on the u.s. side, you have trump meeting with tech executives and suggesting there could be an easing on these products sold to huawei. that has not happened yet. if we get negotiations to continue in d.c., that will be seen as a positive. emily: tom mackenzie for us in china. thanks so much for your reporting. finally this hour, our big story, apple third-quarter results. investors were rewarded with after-hours trade. following the companies report that its services growth margin is roughly twice that of products. tim cook said the iphone returned year-over-year growth in their stores in june and wearables had a blowout quarter. he says the china trade situation isn't impacting the company much. cook says the vast majority of products are made everywhere including japan, korea, china and the eu, and that there is still an appetite for apple in china. tim: i would like to provide some color on our performance in
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greater china, where we saw significant improvement compared to the first half of fiscal 2019 and return to growth. we experienced noticeably better year-over-year comparison for our iphone business there than the last two quarters, and we had sequential improvement in the performance of every category. emily: apple ceo tim cook on the earnings call following the company's results. the stock continuing to spike in after-hours. that does it for this edition of "bloomberg technology." we are livestreaming on twitter. check us out @technology. make sure to follow our global breaking news network, tictoc, on twitter. this is bloomberg. ♪
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