tv Bloomberg Technology Bloomberg July 21, 2022 11:00pm-12:00am EDT
emily: i'm emily chang in san francisco and this is "bloomberg technology." snap misses big and even the ceo says he's not happy about the result. plus the company gives no third-quarter forecast. how deep our advertisers slashing their budgets? we will discuss. plus, consumers are still strapped for cash, pushing back cell phone payments, hurting the bottom line of at&t, shares dropping the most in two decades. i will ask eo what this tells him about the state of the economy. a health kick, amazon purchasing one medical in a deal one day after they published their 60 page report about their own dominance in the sector. we will head to the front lines
of a new showdown. all of that in a moment, but first, tech valley before the bell, more after hours on the back of snap results. ed ludlow is here with the latest. snap, not so good. ed: what's so interesting is how tech is dominating the psychology of the market. it makes for a pretty big pullback in yields when you look at the 10 year treasury. yields had risen slightly higher in a knee-jerk reaction to the ecb raising rates more than expected and bitcoin, you kind of had a risk on sentiment right now. i had been really watching the nasdaq 100 where we had the best three-day run since may, adding 6% to 7% on the index. looking at the moves within it, next week is such a crucial weekend everybody is talking about earnings, right, positivity in the markets, bottoming out on the index.
it has been a mixed bag in the earnings season but some of corporate america has held up well. will big tech follow suit? i know you are talking about amazon and one medical having a fantastic day. bloomberg reporting late in the session that the chief of the austin plant in tesla under internal probe, but that didn't do much to dent to those shares. snap, as we put it, sprinkling. a precipitous drop. the story is one of missed topline sales as advertisers pull back and we see headcount reduction. we are talking about a company we are talking about a company not giving guidance in the third quarter. emily: all right, thank you. we will be back with you a bit later in the show, but i want to talk more about snap now with the principal analyst at insider
intelligence. jasmine, how bad of the signal does this send? jasmine: this isn't totally unexpected. the question was how big of a slump it would be and now it is increasingly clear that these macroeconomic challenges are really putting pressure on their ad business. they have pasted their feud -- based their future on augmented reality, which holds promise but it is niche as a commerce tool and at the same time we have privacy changes that have disproportionately affected performance advertisers, creating a one to punch for their ad business. they are of course a small player in the ad market and we
expect them to make up 1% of digital world wide ad revenues, they could be more susceptible to these challenges than bigger players. emily: that's the question, is this just snap or is it going to impact everyone else it will we see this in the results of google, meta, twitter, all on the back of those results as well? how contagious, if you will, is it? jasmine: we will be hard-pressed to find a social platform that hasn't struggled. i'm not expecting fantastic results for any of these companies but the smaller players tend to be more vulnerable to these challenges than the larger ones. emily: how much competition do you foresee from streaming services in the ad business. netflix, disney, hbo, hall supporting ad supported models. is this a new battleground? jasmine: i cover social media, not streaming companies but the more the consumer attention is divided between the platforms, the more options advertisers have on where to end those dollars on these issues like the apple privacy changes impacting social media companies, the more
likely it is that they will diversify their spending and perhaps spend elsewhere. emily: what can we anticipate from twitter results coming out tomorrow? we know that they were the winners around one in court and that sideshow is going to be going on for several more months at least. jasmine: i'm not expecting great things from them tomorrow. they have been distracted and it's made it harder for them to focus on knowing their business and revenues. twitter is also a small player in the digital ad market and make up around 1% of total worldwide digital ad revenues this year for our forecast. it is vulnerable to these macroeconomic challenges, as well as other changes to online privacy and shifts in consumer behavior. emily: all right, we will continue to listen in on that
joining me now, john stankey, ceo of at&t. what is your response to their response? john: investors look at the cash number and it was out of pattern or the second quarter and i acknowledge that it is. as i described this morning during the call, a lot of was by your choice. we have record customer growth and we had to fund it and that buyers cash out the door. that's not business i'm going to walk away from and frankly, the numbers in the economy are a bit stronger right now than we had anticipated last year when we set the plan. it's a good thing we have got the customers coming in the door but it had a negative impact on cash. secondly, investing record levels in the business where we fronted loaded the capitol plan and from our perspective that's a good thing, allowing us sell into the inventory and drive more broadband subscribers and
get more 5g coverage out there to customers. it took more cash. the one element i think you are referring to his we saw customers take longer to pay their bills but we were pretty clear that we were not saying that customers were not paying their bills were that activity was slowing down we just said simply that we had customers taking longer to pay their bills. in a business our size, when you see them take a day or two longer, that's a significant impact to the cash flow. emily: what's interesting here is that this is a recent trend you have seen in the last few weeks. what are the chances that the delays get longer or argue affecting these customers to potentially cancel? john: i think we don't expect these customers to cancel. we have had a lot of experiences going through economic downturns .
probably depending on your point of view that you hold in the economy and future right now, looking at projections in the future, people are talking soft landing or avoiding recessional together. we have been through much more severe cycles and what we know is that customers really want to keep connectivity service. they stick through we had we don't view this as cataclysmic at all. creating a working capital problem is not a bad debt issue. whether or not it gets more severe, i'm not a fortune teller . i wouldn't anticipate that in the economy right now based on these numbers, but we do expect a more tepid environment working forward and that could slow down economic activity a little bit or extend things a little bit. we have taken a conservative view on the forecast right now and feel comfortable that we
have it under control for the balance of the year. emily: you are investing in the business, maintaining capital programs. will you have to cut dividends? john: no, we have plenty of coverage on the dividend. the gist of the dividend coming out of the warner bros. discovery transaction, we just pay down 40 billion in debt on the balance sheet they great improvement where as a result of that we have a lot of free cash flow cushion. we are investing at a record pace in customer growth and networks, as we have explained to our investor base. that is not a forever rate of investment. we are repositioning the business, penetrating with fiber, improving internal processes to take costs out.
yielding dividends back to our business or better operating performance and leverage as we have characterized for the balance of the year. we will have plenty of room to cover the dividend and invest moving forward. we feel very comfortable about that. kriti: are you still considering -- emily: our use of considering raising prices? john: any company in an environment with extended high inflation rates has to be aware running both sides of the equation. being vigilant about costs to make sure that they are on a perpetual cycle to take costs out for being aware that if you are in a long extended lay sherry cycle you sometimes have to work the revenue side of it, too. we did one of our first actions earlier this year in engineer that as a win win or customers. we had to take some prices up but we were able to give the customer more value with features, plans, and services they could migrate to. i don't know what the next 12 months has in store. 9% inflation? will we have to consider other actions on rising
? i would say that's not off the table. right now we haven't made any decisions on that and haven't made any specific lands. emily: as an industrywide issue, would you be surprised if you didn't see t-mobile and verizon finding customers putting off their bills? john: all i know is what our data is it i can tell you that our customers have basically extended their payment cycle by two days and as i said i'm not concerned about that, given past history. i'm looking at relative to pre-pandemic levels. it's not grossly out of line with pre-pandemic levels. what i can tell you is that at&t
is a microcosm of society in our customer base. i would think that what we are seeing is kind of representative of the broader economy. i don't know that for a fact. all i know is the data i have on my customers. emily: you have a 23% -- 23 state footprint in fiber and i know you want to make them competitive in the united states. that landscape is changing and and fast. looking to buy or build beyond what you have done so far? john: it's a good question and to put this in perspective, from january of this year to today, as we reported, we have grown over 2 million connected locations on the fiber network and are now at 18 million connective locations. we are the scaled fiber provider in the united states and we are building at a rate faster than anyone else deploying fiber.
our organic oath is what powers the business right now. our ability to muscle the supply chain and resources and the capabilities to go out and build more infrastructure. that really is the foundation of what we need to do moving forward. other people deploy fiber in the united states. frankly most of them are subscale compared to us and when we have that success we are having to do things we do well, engineering rate fiber networks equity, working through it on an organic basis is probably the right play for us right now. emily: at&t got out of the media business with the big sale of time warner and since then we have seen media giants really struggle. what did you and at&t see that,
for example, netflix didn't? john: first of all, i think that netflix is to be praised and admired for what they have created as a business. they have built a new model that will be the new dominant model of distributing entertainment content and all consumption of video content for a decade to come. i would tell you that i think what we viewed as possibly being a little bit different and more quickly is that many times i said i felt it was important that these streaming platforms have a two-sided model, subscription and advertisement. reports are and the company itself has said that netflix is going to start to introduce advertising and frankly i think that will be good over the long haul, letting them think about different types of content, sports content that needs to be alongside advertising for it to be a viable economic approach. they had a great valuation that has been tempered a bit. my point of view on streaming is not that it is a bad thing, i
would like to see if i were in his shoes, see him move closer to that valuation and maybe they came down to something more realistic. all things considered, i think it's going to be a strong and viable business moving forward as, ultimately, the early innings shakeout and we get into a steady state area i think that david and warner bros. are well-positioned for that. emily: you think that shutting down of cnn plus was the right move based on what you knew? john: i don't know, i wasn't in the room at the time. david has his own strategies on where he wants to take the business and allocate capital. i'm not party to those conversations, i don't know what they were and i'm sure that within that context he made the decision he felt was best for the business. emily: to wrap this up, we saw the business segment getting weaker and i wonder what other companies should be looking at in your report. our business is holding back more broadly on spending and is that a warning sign about the economy?
john: i don't think so, emily. we are the largest provider of services, to large and complex organizations and that's an envied position to have but then there are the businesses going through the fastest rate of technology evolution. they are orienting themselves away from traditional networks that used to be operated in a way that was pitched exclusively by companies like us to defined networks that ultimately shifted the capabilities either to the company itself or into a hyper scaler environment and that changes our role in those particular companies and that is why as a business we are pivoting away from our strong position on the enterprise side where we will continue to service those customers and meet their needs in a way where we can match them, but we really want to strengthen physicians in
the midmarket and our brand is well-positioned to do that. these types of customers will lead our expertise and our own and operated infrastructure to run the companies and we have great penetration there with a great amount of growth as a result. i don't think it is a weakness. i think that networking is getting more and more important, mobile and next. it is more of a pivot on technology and how we are positioning ourselves to line up against it. emily: all right, john, great to have you here on the show, thank you for taking the time. all right, coming up, a probe into one of teslas highest ranking executives in a number of them he's already fired according to -- number of employees already fired. the scoop from our own ed ludlow, next. this is bloomberg. ♪
emily: one of the top lieutenants of elon musk is now the focus of an internal investigation. according to bloomberg sources they are looking into afhsar for his role into purchasing hard to get supplies that were not for tesla. ed ludlow broke the story, who is -- he is with us now. so, who is this and what did he do? ed: he's the elon musk right-hand man.
he got promoted to be the director of the project of the office of the sea and more recently he has overseen the construction of the austin plant and now production is taking place there and according to sources internally, finance group, legal and audit, they are looking at a procurement order for glass. they wanted to know what it would be used for and if afhsar knew about it or not and ultimately according to sources one of the questions being asked is if the glass would be used by elon musk for personal use. not for the construction of tesla or their own construction. emily: what are we thinking, was this for an outside secret project or a secret project for the ceo? ed: we don't know. sources tell us that omead afshar told some employees to generate the order and told them that it was literally for a secret project. beyond that we don't have much more information. we know that it was generated earlier this year and that the consideration of suspicion around it has been in place for a number of months, first through the internal auditing team and more recently the head of legal themselves who have been looking into it and the
involvement of omead afshar. emily: a number of other employees have already lost their jobs over this. is omead afshar, you know, is he going to keep working at the company? go on a leave of absence? ed: according to sources we have been told that people have been fired and connection to this and that the consideration right now is that omead afshar will be put on a leave of absence. we don't have timing on that and we did of course ask elon musk and tesla representatives for comment and you haven't heard anything back. frankly, we don't know the position of tesla on this, or the latest that it could be happening as of this afternoon, but that is what our reporting revealed. emily: ed ludlow, big scoop from you on this. we will continue to follow your reporting.
this week, apple published a report. amazon has been developing its own health care presence over the last few years. amazon has announced buying one medical. it operates medical offices in 25 markets across the united states. we have known about amazon's health-care ambitions. why is amazon buying one medical? >> this is the third biggest deal after whole foods and mgm. amazon gets access to hundreds of thousands of customers. this is amazon trying to make its mark and pushing into health care in a big way. they bought pill pack. this is them getting deep into the primary care market. the deal took some people by surprise, but i think knowing how good amazon is with manipulating data and analyzing
it, it will be interesting to see what they do with one medical, how they use the whole foods channel, if they combine those things to offer memberships or services where you could get blood pressure checks at whole foods or something like that the way you can return an amazon package at whole foods. emily: for one medical customers, what's going to change? >> there aren't many details we know so far. we know that one medical had been burning cash. the stock was on a roller coaster.
this will help it expand a little more quickly and probably push into new markets. beyond that, we are waiting on more details from amazon about what it plans to do. emily: meanwhile, apple is touting its own health care offerings. is this a place where you expect to see m&a pickup? >> definitely. last year, we saw two different big deals. a lot of these deals are about access to data. google has also signaled ambitions into health care. the people i talked to say that this will continue especially since amazon has made this big push, it's a signal to others to punch back. emily: thank you. i want to stay with this story. a lot of people didn't believe you that. here they are. what do you make of one medical being added to their portfolio? >> it is massive news.
it's a long time coming. i started reporting on amazon having ambitions in the space in 2017. pharmacy was the first start, then you saw them touting telemedicine amazon care. now, primary care with one medical. one medical has networks and relationships with employers across the country. they have their own medical record that they built from the ground up and software that will be amazing for amazon to access and that's no doubt part of the reasoning behind this deal. i can see them integrating all of these offerings into something very powerful. emily: what does that look like to you? are we going to be getting our blood pressure checked at whole foods? do patients want that? >> all of these things are
absolutely possible. what they fundamentally recognized is the future of health care is hybrid. it's not just telemedicine, virtual, or brick and mortar. you can't do everything from home, but you will need to go somewhere to get your blood pressure checked somewhere if you need it. if that's at whole foods, why not? i could see whole foods expanding deeper into pharmacy as well. that's just one direction they could go. at the end of the day, how i see it it's fundamentally about amazon's obsession with the customer. they have been saying this for decades now.
first books then other areas of retail. it seems obvious to me, because it was the last piece of their retail empire that they had not conquered. this is a signal that this is something we are moving into and they are deadly serious about it. emily: there have been comparisons between amazon and kaiser. do you think they could be a competitor? >> imagine if kaiser were starting today what they would build. that's a question amazon has in front of them. they imagine having at all. pharmacy, lab and diagnostic, and primary care. think about what they could do with the referral networks they are building with health systems and how do you send patients to the right care? for years, they have been talking about building a true front door to health care. if your patients need help, what do you do? how do you access care at the right price? that's what amazon could do and they could be the first player to do it. emily: it hasn't all gone right. amazon, the jp morgan venture with berkshire hathaway
collapsed. meantime, you have apple pushing into this business. how do you see amazon differentiating itself from apple? yesterday we were asking if apple might buy peloton. could that be of interest to amazon as well? >> peloton could be of interest to both companies. the difference i see with amazon is they could do something in actual health care services and the delivery because they are not afraid of low-margin businesses. when you look at big tech competitors, they are used to large software margins.
apple is hardware at its core. amazon is a supply chain and logistics company. amazon has the biggest promise of all the big tech companies to do something very real. you mentioned haven which is a great point. that was not successful venture. they teamed up with two other big employers to do something in that space. when i was back at cnbc and this was unveiled, it was thought that the real health care push would happen behind the scenes and that's exactly what has happened. emily: interesting to hear your perspective. thank you for joining us. coming up, the energy crisis and bitcoin mining. we will talk to a mining giant about why it had to dump most of its bitcoin holdings last month. that's next. this is bloomberg. ♪
emily: bloomberg has learned that authorities have arrested a coinbase employee in and insider trading scheme. he has leaked information. what happened? >> this was a massive bloomberg scoop. you have federal prosecutors as well as the sec. an employee helped oversee listings allegedly tipping off his friend and brother about the listings. a member when listings of tokens happen, that's material here.
i want to point out this quote from the manhattan u.s. attorney's office. he is saying this is a further reminder that web3 is not a law free zone. now you have federal prosecutors taking a look at insider trading for the first time in cryptocurrency. a landmark case that affected a coinbase employee. emily: coinbase has been under pressure already because of the crypto route. where are we in the markets today? things have been looking green. >> we are flipping to the green again after a couple of days of weakness. this was a month where you are
seeing crypto jump again. ending last month less than $19,000 in the red. we really seen a deep selloff in crypto winter. now you are seeing gains above $23,000. last month above 31 k. we have a way to go before recouping gains, but we are coming back. emily: hang on, i want you to join us for this next conversation. we're going to talk about this and the impact of crypto winter on crypto mining. our guest is the ceo of core scientific. thank you for joining us. what is your take on what's going on in the crypto markets?
we are seeing a lot of red. a bit of a turnaround, nobody knows if this is a long-term sustainable rally or just a blip. i know it's hot where you are, but it's feeling cold if you are an investor. >> you're right, it is hot where i am. about 102 degrees in austin, texas. what i would say we are seeing is first of all a time in our industry that happens with many growing and nascent industries where in fact rationalization and cleansing occurs. when you take market pressure, macroeconomic pressure, pressure on technology, and the pressure on our industries, what you are seeing is tumultuous time. we have seen bitcoin come back a bit and we are happy to see some stability in the pricing of digital assets.
emily: we have seen bitcoin mining companies, they are normally big holders, selling their assets. you just dumped a huge portion of your bitcoin a month ago. why? >> i can't say that i regret what we have done. we produce a lot of bitcoin every month. we are currently running at a pace of 1200 bitcoin per month and we expect that to grow considerably over the course of this year as we continue to invest in both our servers and infrastructure. there are a couple of considerations. when you are running a production business. you have to make sure you have enough capital or cash to pay
your bills when do. we produce bitcoin, but our obligations are in dollars. we have to generate enough dollars to pay those obligations. second is in the tumultuous environments, liquidity is very important. if you have liquidity, you should make sure your business is built to survive and it puts you in a position to take advantage of opportunities that arise in a distressed marketplace. we made a strategic decision that it would behoove us to become much more liquid on our balance sheet to give us more flexibility to take advantage of the situation that we see in the coming months. >> in the coming months, there are other issues. it's the weather. the heatwave you are seeing, how is this going to continually impact operations? what can you do to get around? >> you're right, it's hot across the south and where i live in austin, texas. as you have discussed with others before me, one of the
beauties of our industry is that our production can be adapted to demand response. in situations like this, we quite often curtail or down power machines to make sure we are providing support to the to the grid so that others are not impacted. at this very moment, we have curtailed our operations for the afternoon at the request of -- that said, there are roughly 5000 excess megawatt hours available. 5200 megawatts available right now for the texas grid. by down powering, what we have done is provided more cushion to the system here in texas. >> i also want to talk about liquidity, because you see this affect others as well. you have tesla saying that
they're selling should not be seen as a verdict on bitcoin. this is so soon after elon musk also said that tesla had diamond hands. how do you reconcile both things? do such a big believer and buyer of bitcoin could have to sell because of the broader market issues? >> i don't know tesla's finances intimately, but i do happen to own one of their cars. my son was smarter than me and happens to own their stock. i understand that elon musk personally as well as the company have considerable holdings. we decided it made good business sense to get more liquid and it seems tesla decided to do the same.
these markets have been moving very quickly. the conditions have been very uncertain. a lot of volatility. i understand why they would decide to create a little bit more cash on their balance sheet. emily: interesting, thank you for joining us. coming up, all the latest in the world of ev. rivian's electric vans. our conversation with the rivian ceo next. this is bloomberg. ♪
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vice president of transportation to talk about the partnership. >> we will have thousands of electric vehicles delivering to millions of customers. our focus is around sustainability. we partner because we believe -- we thought we can do something to reimagine what sustainable fleet could look like. emily: meantime, rivian's ceo spoke to ed about the rollout. >> as our production has continued to ramp, amazon is ramping the number of their centers that can accept all of these vans. it's everything from charging infrastructure to making sure the drivers are ready. it's a close partnership as we plan out what it looks like when you go from hundreds to thousands to tens of thousands
to 100,000 vans within their system. ed: how is the ramp up going? at the same time, you are ramping, is the van experiencing the same issues with supply chains that consumer vehicles have? >> the van and consumer vehicle are similar in that they have the same core technology backbone. obviously, the rest is very different. in some of the areas we are more constrained like semi conductors, that has been a challenge over the last six months. with regard to the where the vehicles are produced in the plant, we have two separate lines. one line produces the truck and now the suv. the commercial vehicle line produces this. then there is a narrower and shorter one. launching four different vehicles on two different lines over the last six months has certainly been challenging with
the supply chain backdrop and the pandemic. teams of come together to deliver on that. we have been living in the plant so to speak to get production ramped up and we are excited about the back half of this year. emily: amazon is a global company. do you see a future where rivian manufactures vans in the markets where amazon would hope to deploy them? >> to start, we have the production facility here in illinois. as we scale, we will have to ultimately have multiple plants. to go into those other major markets having localized or regionally localized production is key. thinking about europe as a market, in the long term we will have to put production there. ed: bloomberg has reported that
rivian is considering layoffs or reduction. have you made any progress on that? what is the kind of thinking there? >> one of the things we have talked about is the need to be hyper focused on the right set of objectives even the economic climate we are in. that's ramping certain vehicles in the normal facility. developing and launching and ramping two platforms. building out the go to market parts of the business. that's also driving profitability and a level of cost efficiency. as we have gone through all of the things we are doing, it has created opportunities for us to more efficiently structure parts of the team and we are working through parts of that process, these are some of the hardest decisions a leader has to take in running parts of the business.
as you said, it doesn't impact our manufacturing team. emily: that was the rivian ceo. you can catch more of interview on bloomberg.com. that does it for this edition of "bloomberg technology." friday, we will be talking about everything crypto. don't forget to check out our podcast as always wherever you get your podcasts. this is bloomberg. ♪
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