WEBVTT - TikTok Sues Montana and Zoom Earnings 0:00:01.600 --> 0:00:06.280 From Bhart where Innovation, Money and Power Collie in Silicon Valley, 0:00:06.440 --> 0:00:10.440 n Beyond. This is Bloomberg Technology with Caroline Hyde and 0:00:10.680 --> 0:00:24.360 Ed Ludlow. 0:00:25.560 --> 0:00:29.320 I'm scarletfu In for Caroline hide a Bloomberg's World headquarters. 0:00:28.760 --> 0:00:31.040 In New York, and I'm Alex Brinka and for Ed 0:00:31.120 --> 0:00:32.159 Ludlow in San Francisco. 0:00:32.360 --> 0:00:33.840 This is Bloomberg Technology. 0:00:34.320 --> 0:00:37.199 Coming up, We'll hear from the CEO of TikTok as 0:00:37.240 --> 0:00:40.320 the company sues Montana following the state's decision to ban 0:00:40.400 --> 0:00:43.680 the popular app. What steps is TikTok taking to alleviate 0:00:43.800 --> 0:00:44.480 US scrutiny. 0:00:45.400 --> 0:00:47.879 Plus will sit down with the CFO of Zoom as 0:00:47.880 --> 0:00:51.200 the company faces growth hurdles when it comes to enterprise customers. 0:00:51.440 --> 0:00:54.440 And we'll be speaking to executives from Amazon and Adobe 0:00:54.480 --> 0:00:57.880 to discuss product launches, generative AI, and the state of 0:00:57.920 --> 0:01:02.400 the consumer. All that and more coming up, But first 0:01:02.440 --> 0:01:04.320 let's get you check on the financial markets. 0:01:04.319 --> 0:01:04.479 Here. 0:01:04.480 --> 0:01:07.199 It's another day of modest moves in US equities because 0:01:07.200 --> 0:01:10.000 it's really groundhog day when it comes to the big themes. 0:01:10.600 --> 0:01:11.200 Sailing talks. 0:01:11.480 --> 0:01:14.480 No agreement yet, even though we're about nine days away 0:01:14.480 --> 0:01:17.360 from that June first X date when Washington runs out 0:01:17.400 --> 0:01:21.120 of cash. We know that President Biden and Kevin McCarthy, 0:01:21.160 --> 0:01:23.280 the Speaker of the House, will be scheduled to speak 0:01:23.319 --> 0:01:25.880 and meet daily. They began meeting at about eleven am 0:01:25.880 --> 0:01:28.039 Eastern time. And of course the big question of whether 0:01:28.280 --> 0:01:31.800 we'll get a recession or no recession. Today's data showed 0:01:32.040 --> 0:01:35.040 that business activity grew the most in a year, so 0:01:35.160 --> 0:01:38.399 that's pointing to perhaps a soft landing. When you add 0:01:38.400 --> 0:01:41.120 it all up, we're looking at the yield on the 0:01:41.160 --> 0:01:44.280 tier moving up to towards four point four percent. At 0:01:44.280 --> 0:01:46.560 one point it did rise to that level. But the 0:01:46.640 --> 0:01:49.400 NASAC one hundred is down a quarter of one percent, 0:01:49.600 --> 0:01:50.440 still holding near. 0:01:50.360 --> 0:01:51.520 It's thirteen month high. 0:01:52.040 --> 0:01:54.640 The euro is losing ground, losing four tens of one 0:01:54.680 --> 0:01:58.520 percent after data show manufacturing Europe contracted the most in 0:01:58.640 --> 0:02:02.639 three years, basically since pandemic and I included the Topics index. 0:02:02.680 --> 0:02:05.559 The broad market measure in Japan down by two thirds 0:02:05.600 --> 0:02:08.880 of one percent after chip related names led the drop there. 0:02:09.080 --> 0:02:12.440 Now that the country is tightening its export controls starting 0:02:12.480 --> 0:02:16.000 in late July. Now, if you put everything into context, 0:02:16.000 --> 0:02:17.600 we know the rally in big tech has made the 0:02:17.680 --> 0:02:20.760 NAZAK one hundred, a star performer, and if we pull 0:02:20.840 --> 0:02:22.560 up a chart, what you'll see is that it's up 0:02:22.600 --> 0:02:25.960 twenty six percent this year alone. But that's got to 0:02:25.960 --> 0:02:28.520 be put into context here, right, because you go back 0:02:28.520 --> 0:02:30.960 to the end of twenty twenty one, start of twenty 0:02:31.000 --> 0:02:33.600 twenty two, and what you see is the NASAC, which 0:02:33.639 --> 0:02:36.920 is the blue line there, really playing catch up with 0:02:37.040 --> 0:02:39.359 the broader market, which is the white line, the SMP 0:02:39.480 --> 0:02:41.600 five hundred. At the start of twenty twenty three, which 0:02:41.600 --> 0:02:45.120 is right around here. Fund managers who were underweight tech 0:02:45.160 --> 0:02:47.920 because of their big losses last year, increase their exposure. 0:02:48.160 --> 0:02:51.160 They rebalance their portfolios. Then in March, when the banking 0:02:51.200 --> 0:02:55.240 crisis banking stresses began, small caps, which is the yellow line, 0:02:55.280 --> 0:02:58.120 really broke apart from the broader market, the white line, 0:02:58.200 --> 0:03:00.919 the SMP five hundred, and investors what did they do? 0:03:01.080 --> 0:03:01.960 They found safety. 0:03:02.000 --> 0:03:04.520 They found a haven in big tech because of their 0:03:04.600 --> 0:03:07.720 dominant market share, their free cash flow, and their robust 0:03:07.720 --> 0:03:10.559 balance sheets. Alex, what are you taking a look at. 0:03:10.800 --> 0:03:13.160 I'm looking at the biggest movers on the day today. 0:03:13.280 --> 0:03:14.360 First up, we have Zoom. 0:03:14.680 --> 0:03:17.840 It's sliding about seven percent. That's the biggest decline in 0:03:18.040 --> 0:03:21.040 almost six months after the company reported earnings last night 0:03:21.320 --> 0:03:25.560 that really disappointed the street. Their customers, their consumer customers, 0:03:25.600 --> 0:03:29.520 their business customers. Growth there has plateaued, and their big 0:03:29.560 --> 0:03:32.960 plan to grow sales with big enterprise customers might not 0:03:33.080 --> 0:03:35.200 happen as soon as the market expected. We'll have more 0:03:35.240 --> 0:03:37.680 on that later in the show. Next, I have Ali Baba. 0:03:37.760 --> 0:03:41.520 It's down one point five percent. That's pairing some earlier losses. 0:03:41.640 --> 0:03:43.960 The company said it's cutting seven percent of its staff 0:03:44.160 --> 0:03:47.000 in its cloud business. You'll remember this is a company 0:03:47.000 --> 0:03:50.240 that's planning to split itself up six ways. This would 0:03:50.240 --> 0:03:52.760 be one of the business units that it's eventually planning 0:03:52.800 --> 0:03:53.840 on spinning off. 0:03:53.640 --> 0:03:54.680 And taking public. 0:03:55.040 --> 0:03:59.160 Now we have a record high for Broadcom, the third 0:03:59.200 --> 0:04:01.800 stock i'm watching here. It's ticked up about two and 0:04:01.840 --> 0:04:05.520 a half percent today. It's the all time high because 0:04:05.560 --> 0:04:08.720 this chip maker has inked a multi billion dollar deal 0:04:09.040 --> 0:04:13.040 for five G radio frequency parts with Apple for Apple's iPhone. 0:04:13.240 --> 0:04:16.480 Now I want to take over to kind of our biggest. 0:04:16.080 --> 0:04:17.200 Rise on the day. 0:04:17.600 --> 0:04:21.080 That would be Yelp up flirting with ten percent. 0:04:21.440 --> 0:04:22.680 That's a six month high. 0:04:22.800 --> 0:04:25.800 It's been climbing on a report that an activist TCS 0:04:25.800 --> 0:04:30.440 Capital Management has come knocking the firm. TCS plans to 0:04:30.480 --> 0:04:33.359 deliver a letter to yup's board urging the site to 0:04:33.400 --> 0:04:38.000 potentially sell itself or look into strategic options. Investors seem 0:04:38.080 --> 0:04:39.919 to be down with that idea. And it's not the 0:04:39.920 --> 0:04:42.159 first time yelp has actually seen an activist if you 0:04:42.200 --> 0:04:45.760 rewind to twenty nineteen, as QN investors urge management to 0:04:45.800 --> 0:04:49.960 make changes, they did so, perhaps some bullishness on some 0:04:50.040 --> 0:04:53.440 potential for change here at yelp. If this new activist 0:04:53.520 --> 0:04:55.320 is successful, Scarlett. 0:04:55.440 --> 0:04:58.760 It's great context there and certainly something we'll be keeping 0:04:58.760 --> 0:05:02.279 an eye on now. Around the globe, the Cutter Economic 0:05:02.360 --> 0:05:05.880 Forum is currently underway where key global business and investment 0:05:05.920 --> 0:05:08.120 leaders are converging in the Middle East, and of course, 0:05:08.160 --> 0:05:10.840 our very own Caroline Hyde sat down with the CEO 0:05:10.960 --> 0:05:13.760 of TikTok and he spoke about how it's working with 0:05:13.800 --> 0:05:16.880 Oracle to review its code and oversee US user data. 0:05:17.320 --> 0:05:19.919 He also talked about the recent bill banning the platform 0:05:20.000 --> 0:05:20.680 in Montana. 0:05:20.800 --> 0:05:21.400 Take a listen. 0:05:21.680 --> 0:05:25.520 We believe that the Montana builder was recently passed is 0:05:25.520 --> 0:05:30.280 simply unconstitutional, and as you pointed out, we very recently 0:05:30.279 --> 0:05:33.320 filed a lawsuit to challenge this in the courts, and 0:05:33.640 --> 0:05:38.080 we are confident that we will prevail. Separately, you know, 0:05:38.279 --> 0:05:40.960 I've noticed that some of our creators have also filed 0:05:41.000 --> 0:05:44.159 a separate lawsuit challenging the same bill in the courts, 0:05:44.960 --> 0:05:46.800 and I do want to say that, you know, they 0:05:46.800 --> 0:05:51.839 care because TikTok is really important to them. And this 0:05:51.960 --> 0:05:53.400 is the part of the story that I think is 0:05:53.400 --> 0:05:56.359 the most important part you know of TikTok, which is 0:05:56.360 --> 0:05:58.960 that now that we have more than one hundred and 0:05:59.000 --> 0:06:02.719 fifty million Americans on our platform on a very active basis, 0:06:03.040 --> 0:06:05.719 more than a billion around the world. You know, people 0:06:05.839 --> 0:06:09.000 use TikTok as a place for expression. It's a very 0:06:09.040 --> 0:06:12.159 different experience as you may know from the other apps 0:06:12.160 --> 0:06:14.400 they are available in the market, and this is one 0:06:14.480 --> 0:06:19.000 for discovery, for expression, for free expression, and a lot 0:06:19.040 --> 0:06:22.560 of our users use TikTok to find their communities, to 0:06:22.680 --> 0:06:26.960 discover and to express themselves, you know. Moreover, you know, 0:06:27.000 --> 0:06:30.279 there are five million small businesses in the United States 0:06:30.560 --> 0:06:34.039 that depend on TikTok and millions more around the world, 0:06:34.120 --> 0:06:36.800 including here in this country and in the region. So 0:06:38.000 --> 0:06:40.640 I think, you know, ultimately it is about providing value 0:06:40.640 --> 0:06:43.440 to these users. And making sure that you know, we 0:06:43.480 --> 0:06:46.760 continue to provide them with a great service that benefits them. 0:06:46.800 --> 0:06:50.080 And that's some you know, our key focus at this moment. 0:06:49.960 --> 0:06:53.000 In time, expressing oneself. 0:06:53.920 --> 0:06:56.599 Was that quite hard to express yourself. 0:06:56.200 --> 0:06:59.039 Most recently when you're in Congress, when you are having 0:06:59.040 --> 0:07:02.880 to try and tell your story of why TikTok is 0:07:02.920 --> 0:07:04.279 important in the United States. 0:07:06.600 --> 0:07:09.159 I think it was a very important process and I'm 0:07:09.279 --> 0:07:13.200 very grateful for the opportunity to show up and to 0:07:13.280 --> 0:07:14.480 tell our side of the story. 0:07:15.040 --> 0:07:16.760 Would you tell your side of the story. 0:07:17.120 --> 0:07:20.040 Throughout the five hours? I believe I had time to 0:07:20.080 --> 0:07:22.640 do that, And I think it's a good opportunity for 0:07:22.760 --> 0:07:26.040 us to explain ourselves because there are some myths and 0:07:26.120 --> 0:07:28.040 misconceptions about our company out there. 0:07:28.440 --> 0:07:33.000 Dig into them, because the key issue that many would 0:07:33.080 --> 0:07:39.360 have is data and the concern the anxiety that ultimately 0:07:39.400 --> 0:07:42.560 the Chinese government can have access to US user data. 0:07:42.560 --> 0:07:46.560 That is why Montana is wanting to ban TikTok. What 0:07:46.640 --> 0:07:49.800 do you wish you could have said to make that 0:07:50.320 --> 0:07:52.480 land that that isn't going to happen, because it felt 0:07:52.480 --> 0:07:56.120 as though you didn't manage to prove that point well. 0:07:56.200 --> 0:07:59.800 TikTok is not available in inland China today. As we 0:07:59.840 --> 0:08:02.520 say it many times, the Chinese government has actually never 0:08:02.560 --> 0:08:04.960 asked us for US user data and we will not 0:08:05.040 --> 0:08:06.080 provide even if fast. 0:08:06.840 --> 0:08:07.040 Now. 0:08:07.080 --> 0:08:10.000 Beyond that we have built over the last two years 0:08:10.560 --> 0:08:14.559 something we call internally Project Taxes, and what it really 0:08:14.640 --> 0:08:18.240 is is to ensure that American data is stored on 0:08:18.320 --> 0:08:23.160 American soil by an American company and overseen by American personnel. 0:08:23.600 --> 0:08:29.040 And this is truly an unprecedented project that none of 0:08:29.080 --> 0:08:32.400 the other companies in our industry have ever attempted. And 0:08:32.440 --> 0:08:35.840 we believe that we have taken steps there above and 0:08:35.880 --> 0:08:39.080 beyond what our industry has done to protect the safety 0:08:39.080 --> 0:08:40.960 of US user data, which is very important. 0:08:41.120 --> 0:08:43.520 And where are you with Project Texas, Because there's been 0:08:43.559 --> 0:08:46.120 some reporting and I know that you've come out and said, 0:08:46.240 --> 0:08:50.400 very soon Oracle will have the unprecedented access to our 0:08:50.559 --> 0:08:53.240 data or indeed to your the ways in which of 0:08:53.400 --> 0:08:54.440 your source code. 0:08:54.760 --> 0:08:56.199 But that's not now. 0:08:56.360 --> 0:08:59.200 When will Oracle be able to enact this sort of 0:08:59.440 --> 0:09:03.000 unprecedented overseeing and transparency of your company. 0:09:03.880 --> 0:09:07.880 Project Texas is a very complicated project and a lot 0:09:07.920 --> 0:09:10.000 of the elements of the project is already in place 0:09:10.040 --> 0:09:15.240 and operational. For example, today, by default, all US data 0:09:15.320 --> 0:09:18.600 is stored in the Oracle Cloud service, already in Oracle 0:09:18.640 --> 0:09:22.640 Cloud infrastructure and no longer in our own service in Virginia. 0:09:22.240 --> 0:09:24.600 And seeing you've already run that transfer. 0:09:24.320 --> 0:09:28.840 It's already done by default correct. Separately, Oracle has begun 0:09:29.040 --> 0:09:31.880 to source the review of the code, although it's, as 0:09:31.880 --> 0:09:35.040 you can understand, you know, a complicated project that will 0:09:35.040 --> 0:09:38.160 take time for us to finish the details. So it's 0:09:38.200 --> 0:09:41.160 on track. Oracle and ourselves are working together with the 0:09:41.240 --> 0:09:44.120 US government to finalize the details of Project Texas. 0:09:44.960 --> 0:09:47.560 Bloomberg Technology co hosts Caroline hight is standing by with 0:09:47.600 --> 0:09:50.800 Mark Caroline lots of making his case. They're telling a story, 0:09:51.000 --> 0:09:53.199 or is your big takeaway from your conversation. 0:09:53.520 --> 0:09:56.400 While I was pressing in Alex on your reporting, because 0:09:56.400 --> 0:09:59.400 it was your story that really instigated this warrior as 0:09:59.440 --> 0:10:02.760 to whether the Oracle deal was really in place, and 0:10:02.800 --> 0:10:04.760 he did try and push back that that is on track, 0:10:04.800 --> 0:10:07.079 as you heard, and the fact that actually they've moved 0:10:07.080 --> 0:10:11.040 that data from their servers onto Oracles already. But ultimately 0:10:11.280 --> 0:10:14.040 the takeaway for me was this is also coming in 0:10:14.080 --> 0:10:16.840 a moment where Meta, where he was once on intern 0:10:16.880 --> 0:10:20.560 We've got to remember, is also being fined a record 0:10:20.559 --> 0:10:22.760 amount by the EU regulators at the moment. 0:10:22.880 --> 0:10:26.120 Why because US may. 0:10:25.960 --> 0:10:30.240 Be able to access EU data, They're worried ultimately about 0:10:30.280 --> 0:10:32.160 exactly what the US is worried about China can do. 0:10:32.440 --> 0:10:35.000 This is a global issue that is currently ongoing, and 0:10:35.040 --> 0:10:36.960 of course that's why they've not just got Project Texas, 0:10:36.960 --> 0:10:39.480 They've got Project Clover over in Europe where they're also 0:10:39.559 --> 0:10:42.439 trying to understand how they can protect user data. This 0:10:42.480 --> 0:10:46.120 feels to me like a moment of deglobalization and another 0:10:46.240 --> 0:10:48.400 level when it comes to technology and his key point. 0:10:48.440 --> 0:10:49.600 It felt like Alex was. 0:10:49.760 --> 0:10:51.240 Look, how can we do this? 0:10:51.440 --> 0:10:54.640 How can we ensure we have data sovereignty without ultimately 0:10:54.720 --> 0:10:57.960 breaking the Internet and I'm sure without breaking his business 0:10:58.040 --> 0:11:00.000 because he really didn't seem to say in any way 0:11:00.080 --> 0:11:02.080 way that they have a plan B for if they 0:11:02.080 --> 0:11:04.000 get banned. He felt that they are here to stay 0:11:04.040 --> 0:11:06.880 when it comes to United States presence for TikTok, or. 0:11:06.840 --> 0:11:08.840 At least a Plan B that he intends to reveal 0:11:08.920 --> 0:11:11.360 for now. Caroline, you did a great job in pushing 0:11:11.400 --> 0:11:14.120 him on whether he actually got the chance to tell 0:11:14.120 --> 0:11:17.040 his story. I'm curious now that you're in Cutter, who 0:11:17.040 --> 0:11:18.960 else have you been talking with? What else did you 0:11:19.080 --> 0:11:21.920 glean from the executives who are attending the forum. 0:11:22.360 --> 0:11:26.000 Well, I think that globalization issue, worry about investment in 0:11:26.120 --> 0:11:30.200 China is ringing true throughout Molus CEO speaking to Francine 0:11:30.200 --> 0:11:34.040 a little bit about that. I was speaking interestingly with well, 0:11:34.080 --> 0:11:37.240 Peter Chen and he himself is a big investor in 0:11:37.440 --> 0:11:40.960 content Love is Blind anyone was He now owns the 0:11:41.000 --> 0:11:43.840 production company behind that. He of course ran Fox for 0:11:43.920 --> 0:11:47.160 fourteen years. We were talking really ultimately about how he's 0:11:47.200 --> 0:11:50.240 trying to be more globalized, trying to buy production and 0:11:50.800 --> 0:11:54.800 content in Mexico, in Turkey to ensure that actually the 0:11:54.880 --> 0:11:58.080 streaming companies they now become ultimately that much more powerful. 0:11:58.120 --> 0:11:59.080 He thinks bea by the. 0:11:59.040 --> 0:12:02.400 Way cable is done, that they be able to have 0:12:02.720 --> 0:12:06.640 natural language, new language, and access the emerging markets in 0:12:06.679 --> 0:12:08.840 that much more of a way. It was interesting, of course, 0:12:08.880 --> 0:12:11.600 AI has been front and center. I spoke to the 0:12:11.640 --> 0:12:15.760 CEO of TikTok shows you about out official intelligence about 0:12:15.840 --> 0:12:17.840 large language models. He wouldn't go there as to whether 0:12:17.880 --> 0:12:20.720 he himself are already creating an LLM for TikTok, but 0:12:20.800 --> 0:12:23.240 he certainly thinks it's going to galvanize video production. And 0:12:23.280 --> 0:12:26.200 I also spoke with Ursula Burns, who many will know 0:12:26.240 --> 0:12:29.959 her as basically the first African American woman to run 0:12:29.960 --> 0:12:32.480 a Fortune five hundred company. She run a tech company, Xerox, 0:12:32.480 --> 0:12:34.840 but she's also now the chair of Toeneo. She's also 0:12:35.160 --> 0:12:38.160 an investor with Integram. It's a private equity or investment 0:12:38.240 --> 0:12:41.640 company that invests in tech companies ultimately, and she's really 0:12:41.720 --> 0:12:44.199 excited by the opportunities in AI. Thinks it can be 0:12:44.240 --> 0:12:47.360 a real force productivity, but is also look worried about 0:12:47.360 --> 0:12:48.400 the regulatory environment. 0:12:48.440 --> 0:12:49.000 Just take a listen. 0:12:49.320 --> 0:12:52.880 This is a technology that is developing, right it's developing. 0:12:53.240 --> 0:12:55.840 We know that if we just leave it to everyone 0:12:56.440 --> 0:12:58.800 we generally leave it to, there'll be a huge amount 0:12:58.880 --> 0:13:01.640 of avnots small amount of habs. This is a place 0:13:01.640 --> 0:13:05.520 that we should have a community working towards, working together 0:13:06.040 --> 0:13:11.920 technical community, government, communities, education, not for NGOs or on 0:13:11.960 --> 0:13:15.640 this unbelievable gift right that we haven't trying to figure 0:13:15.640 --> 0:13:19.560 out a way to make it better good for. 0:13:19.480 --> 0:13:22.960 All that haves have not said something that actually, of 0:13:23.000 --> 0:13:24.079 course is core to U. 0:13:24.160 --> 0:13:24.760 Suli Burns. 0:13:24.760 --> 0:13:27.920 She's got a key focus on diversity at board level. 0:13:27.960 --> 0:13:29.960 We've got a key focus on AI and how that 0:13:30.240 --> 0:13:32.920 maybe just amplifies biases already in the system. So this 0:13:32.960 --> 0:13:34.880 is something she's looking at front and centive, but seems 0:13:34.880 --> 0:13:36.960 to be much more on the optimistic side the force 0:13:37.000 --> 0:13:38.640 for good that AI could ultimately be. 0:13:39.200 --> 0:13:43.079 Absolutely Caroline had great reporting Bloomberg's Caroline Hide at the 0:13:43.120 --> 0:13:45.560 Cutter Economic Forum, which is powered by Bloomberg, And of 0:13:45.559 --> 0:13:48.880 course Caroline will be back in New York later this week. 0:13:57.200 --> 0:13:59.480 Now moving on to Zoom, which released its first quarter 0:13:59.520 --> 0:14:03.800 earnings yesterday, sending shares down after posting mixed results, Let's 0:14:03.800 --> 0:14:08.360 bring in it's CFO Kelly Steckelberg for more. Kelly, when 0:14:08.480 --> 0:14:10.800 I look at the market reaction here today, it seems 0:14:10.880 --> 0:14:13.600 like folks are reading in to the guidance that there's 0:14:13.640 --> 0:14:16.240 some pressure on that really important enterprise business for you all. 0:14:16.840 --> 0:14:17.640 What seems to be. 0:14:17.640 --> 0:14:20.440 Kind of putting a dent in that kind of core 0:14:20.480 --> 0:14:22.960 selling into enterprise customers that you guys have been focused on. 0:14:24.360 --> 0:14:25.800 So Hi, nice to see you. 0:14:25.960 --> 0:14:29.200 We were really pleased with our results that we announced 0:14:29.280 --> 0:14:32.240 last night. We exceeded both the high end of our 0:14:32.240 --> 0:14:35.720 revenue guidance as well as our profitability metrics, and we 0:14:35.720 --> 0:14:37.800 were able to raise our outlook for the full year 0:14:37.920 --> 0:14:40.840 on both the top and the bottom line. Some of 0:14:40.920 --> 0:14:44.440 the key highlights of the quarter was we saw stabilization 0:14:44.600 --> 0:14:47.920 in our online business earlier than we expected this year, 0:14:48.440 --> 0:14:51.520 as well as peak gross margins at eighty point five 0:14:51.560 --> 0:14:55.120 percent and our Zoom Phone, which is our cloud PBX solution, 0:14:55.960 --> 0:14:59.800 crossing the ten percent of revenue threshold. We did talk 0:14:59.800 --> 0:15:03.600 of the fact that we had a reduction as well 0:15:03.640 --> 0:15:08.440 as a restructuring in our direct sales organization, and while 0:15:08.440 --> 0:15:12.520 we saw some traction in the SMB portion of that team, 0:15:12.960 --> 0:15:14.600 you know it's going to take a little bit longer 0:15:14.680 --> 0:15:17.200 for the rest of the organization as expected when you 0:15:17.240 --> 0:15:22.000 have such a significant transition to return to full productivity. 0:15:22.560 --> 0:15:24.960 And that all of that is reflecting in our guidance 0:15:25.000 --> 0:15:27.480 and what you're referring to now. 0:15:27.560 --> 0:15:30.320 Zoom during the pandemic obviously had kind of a growth moment. 0:15:30.360 --> 0:15:31.760 I think the market was looking at you guys as 0:15:31.800 --> 0:15:34.840 a growth stock under those conditions. As you're talking about 0:15:34.840 --> 0:15:38.080 this kind of online consumer piece of your business plateauing 0:15:38.080 --> 0:15:40.680 a little bit and some of this pressure through the 0:15:40.760 --> 0:15:43.720 sales org on your enterprise business, do you look for 0:15:43.720 --> 0:15:46.800 growth elsewhere? Is something like an acquisition or attack on 0:15:47.000 --> 0:15:50.080 something that you guys would consider to kind of juice 0:15:50.120 --> 0:15:52.200 that top line or find some growth out of those 0:15:52.240 --> 0:15:53.320 two key business units. 0:15:54.200 --> 0:15:58.120 So we have really been investing in innovating across the 0:15:58.160 --> 0:16:01.400 platform and we are so when you look forward to 0:16:01.520 --> 0:16:04.160 not only Zoom Phone, but also Zoom Contact Center that 0:16:04.280 --> 0:16:08.080 was released last year. We announced in March some new 0:16:08.120 --> 0:16:13.440 beta features around zoom Iq, which is levering AI to 0:16:13.480 --> 0:16:16.720 be a smart companion to do things like chat or 0:16:16.760 --> 0:16:20.920 email composition, to do meeting summaries, or even think about 0:16:20.920 --> 0:16:24.400 summarizing a long chat thread that maybe you missed earlier 0:16:24.480 --> 0:16:27.760 in the day. We also have announced just in lat 0:16:27.840 --> 0:16:31.240 q one, an acquisition of work Vivo, which will bring 0:16:31.440 --> 0:16:36.440 front and Center a collaborative employee data hub that leverages 0:16:36.520 --> 0:16:40.480 both you know, social as well as intranet. So we 0:16:40.640 --> 0:16:44.080 have an amazing platform that has continued to grow and 0:16:44.120 --> 0:16:46.160 that is what we're looking for to drive the future 0:16:46.160 --> 0:16:47.080 growth of the company. 0:16:47.440 --> 0:16:49.680 I appreciate your answering that, but just to follow on 0:16:49.760 --> 0:16:53.720 what Alex was asking, looks like you've made two acquisitions 0:16:54.160 --> 0:16:54.680 this year. 0:16:55.160 --> 0:16:56.720 Last year six acquisitions. 0:16:56.720 --> 0:16:58.960 The biggest was one hundred and twenty five million dollars. 0:16:59.520 --> 0:17:02.800 Perhaps users are looking for a bigger transformative purchase. 0:17:03.000 --> 0:17:04.320 How are you thinking about that? 0:17:05.640 --> 0:17:09.159 Yeah, we always watch what's available in the market, and 0:17:09.240 --> 0:17:12.920 as you indicated, we've done Solvy and wor Vivo this year, 0:17:13.080 --> 0:17:16.840 both really helping us accelerate the development of parts of 0:17:16.880 --> 0:17:20.000 our platform. And you know, there's three caricteria that we 0:17:20.000 --> 0:17:22.240 look for. We look for technology, we have a very 0:17:22.320 --> 0:17:24.920 high bar. We look for cultures, We want to make 0:17:24.960 --> 0:17:27.160 sure that it would be a great addition to our team. 0:17:27.520 --> 0:17:30.439 And then of course we look to valuation, which you know, 0:17:30.480 --> 0:17:31.960 given what's happening in the market, has. 0:17:31.880 --> 0:17:33.679 Become more attractive over time. 0:17:34.119 --> 0:17:36.760 But we want to make sure that any acquisition we 0:17:36.800 --> 0:17:39.520 would do would really benefit our customers, and that's what 0:17:39.560 --> 0:17:42.840 we look for. How would it transform the customer experience 0:17:43.320 --> 0:17:45.760 and we keep watching for those opportunities. 0:17:46.000 --> 0:17:47.760 I got to ask you about your competition as well, 0:17:47.800 --> 0:17:51.480 because we hear more about companies consolidating their software onto 0:17:51.600 --> 0:17:52.560 Microsoft teams. 0:17:53.200 --> 0:17:55.000 Does this concern you? How do you counter that? 0:17:56.359 --> 0:17:59.920 So you know, Microsoft is a great partner to us. 0:18:00.160 --> 0:18:03.879 We always, again think about things through the customer's viewpoint, 0:18:04.080 --> 0:18:06.560 and what we do is we work with our customers 0:18:06.960 --> 0:18:09.959 to help them leverage whatever products they want. Sometimes they 0:18:09.960 --> 0:18:12.560 want to use Zoom phone and Zoom contact Center or 0:18:12.640 --> 0:18:16.800 Zoom meetings and couple that in with potentially another Microsoft products, 0:18:16.840 --> 0:18:20.960 So we have seamless integrations with them. And we saw 0:18:21.200 --> 0:18:24.199 one of the ways that I measure the strength in 0:18:24.280 --> 0:18:27.480 our business is through our renewals. Q one is our 0:18:27.600 --> 0:18:31.199 largest renewal period, trending all the way back to that uptick. 0:18:31.280 --> 0:18:34.119 We saw the early stages of the pandemic and we 0:18:34.200 --> 0:18:37.560 saw very strong renewals in Q one and very little 0:18:37.600 --> 0:18:41.320 logo trem which tells me that customers might be right sizing, 0:18:41.400 --> 0:18:43.600 but they're sticking with Zoom as they know and love us. 0:18:44.080 --> 0:18:46.760 Kelly, really appreciate your joining us. Kelly Steckelberg is the 0:18:46.800 --> 0:18:48.199 CFO of Zoom. 0:18:48.280 --> 0:18:49.040 Thank you so much. 0:18:49.960 --> 0:18:52.520 Now, coming up on Bloomberg Technology, we're watching shares of 0:18:52.560 --> 0:18:55.479 Apple and Broadcom after the true signed a multi billion 0:18:55.520 --> 0:18:58.560 dollar deal. More details on that next. This is Bloomberg 0:19:09.359 --> 0:19:11.879 and some breaking news here. Jpal, the Chairman of the 0:19:11.880 --> 0:19:14.560 Federal Reserve, has arrived on Capitol Hill. He's meeting with 0:19:14.560 --> 0:19:17.520 House Democrats, the New Democratic Coalition. This was a long 0:19:17.560 --> 0:19:21.000 planned meeting and according to the NBC, the organization, it 0:19:21.040 --> 0:19:24.520 has nothing to do with the debt limit discussions. So 0:19:24.600 --> 0:19:27.600 once again, Jpal at Capitol Hill, we'll keep you posted 0:19:27.680 --> 0:19:30.160 if there are any developments out of that meeting. Let's 0:19:30.200 --> 0:19:32.840 go back to the tech sector, because we looked at 0:19:32.840 --> 0:19:36.879 Apple and it is just signed a multi year, multi 0:19:36.920 --> 0:19:40.320 billion dollar deal with Broadcom to develop five G radio 0:19:40.440 --> 0:19:43.760 frequency components. The stock is lower on the day, Broadcom 0:19:43.840 --> 0:19:45.440 is moving up two and a half percent. Let's get 0:19:45.480 --> 0:19:47.639 some more contexts on this and bring in on Grana 0:19:47.640 --> 0:19:51.199 of Bloomberg Intelligence An. What's interesting here is that Apple 0:19:51.240 --> 0:19:53.480 has a relationship clearly with Broadcom. It is one of 0:19:53.520 --> 0:19:57.399 Broadcom's biggest customers, but they have a contentious relationship. What 0:19:57.440 --> 0:20:00.000 does this deal do when it comes to that contentious relationship. 0:20:00.600 --> 0:20:02.200 Yeah, I think when you look at Apple, I think 0:20:02.240 --> 0:20:04.600 this is a little bit more diversify, you know, away 0:20:04.600 --> 0:20:07.160 from qualcong is. I think what I'm reading more into 0:20:07.200 --> 0:20:11.159 this because for Apple's you know case, it needs to 0:20:11.200 --> 0:20:14.879 diversify not just from you know, one region, which is Asia. 0:20:15.040 --> 0:20:18.639 It needs to broaden its you know, partnership partner network 0:20:18.680 --> 0:20:21.920 as well when it whereas sourcing parts across the world. 0:20:22.400 --> 0:20:25.240 Now anurag, I have to think about Apple's kind of 0:20:25.240 --> 0:20:29.119 big push to bring in homegrown chips and ask the question, 0:20:29.480 --> 0:20:32.440 does this mean that these specific chips, these radio frequency 0:20:32.480 --> 0:20:36.119 chips for five G that Apple Bloomberg's reported is considering 0:20:36.359 --> 0:20:39.480 bringing in house for the creation Does this mean that 0:20:39.560 --> 0:20:42.520 maybe that effort by Apple is not necessarily going as 0:20:42.560 --> 0:20:44.040 well as they had initially thought. 0:20:44.520 --> 0:20:46.840 Now, remember, Apple is never going to do these things 0:20:46.880 --> 0:20:48.960 just for cost alone. It's going to always go for 0:20:49.000 --> 0:20:51.359 the best part that's out there, you know. At the 0:20:51.440 --> 0:20:53.720 same time, and again I say not for cost freeson, 0:20:53.800 --> 0:20:57.240 but for performance. It is designing all sorts of parts 0:20:57.280 --> 0:21:00.879 internally so that the next generation for or next generation 0:21:00.960 --> 0:21:03.720 device that's coming up with can achieve what it wants 0:21:03.720 --> 0:21:06.119 to achieve. Sometimes the partners are not able to provide that. 0:21:06.640 --> 0:21:09.560 I mean, I cannot say that you know whether the 0:21:09.640 --> 0:21:12.560 in house efforts are not you know, going as planned 0:21:12.640 --> 0:21:14.760 or not. But it's just again as I said, it 0:21:14.880 --> 0:21:18.440 is just planned, you know way of looking at things 0:21:18.440 --> 0:21:20.760 and say, I don't want to be dependent on one 0:21:20.760 --> 0:21:23.320 supplier for all my needs. I want to go. You know, 0:21:23.359 --> 0:21:24.520 across the board, the. 0:21:24.520 --> 0:21:27.040 Ever consistent front of me is in tag honorag Run 0:21:27.040 --> 0:21:36.760 of Bloomberg Intelligence. Thank you for breaking that down for us. 0:21:38.400 --> 0:21:39.960 Welcome back to Bloomberg Technology. 0:21:40.040 --> 0:21:42.919 I'm Scarlett Foo in New York and I'm Alex Marinkan 0:21:42.960 --> 0:21:44.720 in San Francisco. All right, we've got about three and 0:21:44.760 --> 0:21:46.960 a half hours to go before the market close here 0:21:47.000 --> 0:21:48.520 in New York, so let's going to check on what's 0:21:48.560 --> 0:21:53.960 going on. Debt ceiling debate talks, ongoing negotiations still wing 0:21:53.960 --> 0:21:55.240 on the market here with the S and P five 0:21:55.320 --> 0:21:57.880 hundred losing a third of one percent, led by materials 0:21:57.880 --> 0:22:01.000 companies and tech companies. Notably to point out that oil 0:22:01.000 --> 0:22:03.439 prices are moving higher to w RETI up by one 0:22:03.480 --> 0:22:07.520 point eight percent after Saudi Arabia's energy minister issued awarding 0:22:07.560 --> 0:22:09.800 to short sellers telling them to watch out. That was 0:22:09.840 --> 0:22:12.520 at the Cutter Economic Forum, where our very own Caroline 0:22:12.560 --> 0:22:15.400 Hide currently is at. And of course because of the 0:22:15.480 --> 0:22:18.360 rise and oil prices, we're looking at XL, the ETF 0:22:18.359 --> 0:22:20.960 that tracks big cap energy names also moving up by 0:22:21.040 --> 0:22:24.560 two percent. Now a couple of individual company names to 0:22:24.640 --> 0:22:26.520 highlight here because we're at the tail end of the 0:22:26.640 --> 0:22:31.440 US earning season when retailers in particular report on their results, 0:22:31.480 --> 0:22:33.560 and what we're seeing is Low's moving up by two 0:22:33.600 --> 0:22:35.800 point four percent, even though it cut its full Your 0:22:35.880 --> 0:22:38.359 outlook saying that it sees a slowdown in spending on 0:22:38.440 --> 0:22:41.840 home improvement. The difference here is that it's reporting gains 0:22:41.840 --> 0:22:46.200 among professional contractors and in some ways and by some measurements, 0:22:46.200 --> 0:22:48.680 doing better than its large arrival Home Depot, which last 0:22:48.680 --> 0:22:52.159 week pretty much said the same thing that it's lowering 0:22:52.160 --> 0:22:55.280 its full your forecast because of broad based spending cutbacks 0:22:55.320 --> 0:22:58.520 by its consumers, by its customers and Home Depot, both 0:22:58.680 --> 0:23:01.040 and Lows both up fight lead two percent on the 0:23:01.119 --> 0:23:05.280 day alex Well. Ten years after the launch of its 0:23:05.280 --> 0:23:08.760 first tablet, Amazon is releasing its newest, the Firemax eleven, 0:23:08.960 --> 0:23:11.440 and what the company is calling its biggest and most 0:23:11.520 --> 0:23:15.080 powerful tablet yet. Joining us now is David Limp, Amazon's 0:23:15.119 --> 0:23:18.800 Device and Services Senior vice president, David I have to 0:23:18.840 --> 0:23:21.399 ask you, guys have been pretty strong in kind of 0:23:21.400 --> 0:23:24.040 the lower price point market for a tablet. This Firemax 0:23:24.080 --> 0:23:26.720 eleven has a higher price point. It feel looks and 0:23:26.760 --> 0:23:28.200 feels a little bit more premium. 0:23:28.560 --> 0:23:31.399 Who are you trying to capture with this latest tablet. 0:23:32.359 --> 0:23:34.840 Well, I think we've really found a place with our 0:23:34.840 --> 0:23:38.720 tablet products where we build premium tablets but at non 0:23:38.800 --> 0:23:43.320 premium prices. And as customers have demanded more from tablets, 0:23:43.359 --> 0:23:46.480 they've increasingly said they wanted larger screens. We have had 0:23:46.520 --> 0:23:48.760 ten inch screens for a while, so like bringing out 0:23:48.800 --> 0:23:52.439 the eleven inch now it's a real big difference for 0:23:52.520 --> 0:23:54.520 us because we did go to an all aluminum design, 0:23:54.520 --> 0:23:59.000 it's thinner. It's really a great opportunity for customers to 0:23:59.280 --> 0:23:59.679 have a. 0:23:59.760 --> 0:24:01.520 Large tablet form factor. 0:24:01.240 --> 0:24:03.840 That can also be used for productivity as well as entertainment, 0:24:04.119 --> 0:24:06.199 but also be able to do it at an incredibly 0:24:06.240 --> 0:24:06.960 affordable price. 0:24:06.960 --> 0:24:08.800 It's just two hundred and twenty nine dollars. 0:24:08.760 --> 0:24:10.240 Right, and this one is definitely geared. 0:24:10.280 --> 0:24:14.440 It seems to increase productivity for workers. But I noticed 0:24:14.480 --> 0:24:16.160 that a lot of your products have a kids version 0:24:16.160 --> 0:24:19.280 the Echo Show five Kids that are designed for kids, 0:24:19.400 --> 0:24:22.359 or they're designed for kids like the now canceled Amazon Glow. 0:24:22.840 --> 0:24:25.920 How do you think about incorporating and building out generative 0:24:26.080 --> 0:24:30.000 AI and LLLM when it comes to serving the kids, 0:24:30.119 --> 0:24:35.040 Because there's a privacy factor obviously that is critical to retaining, 0:24:35.359 --> 0:24:37.960 to building, to preserving that trust with your customer base. 0:24:38.920 --> 0:24:41.119 Yeah, and we've been We've had a version of our 0:24:41.200 --> 0:24:42.960 kids products, as you said, for a long time. 0:24:42.960 --> 0:24:43.120 Now. 0:24:43.119 --> 0:24:45.560 We have it for Kindle, we have it for our tablets, 0:24:45.560 --> 0:24:47.480 we have it for our echos, and even for our TV. 0:24:48.040 --> 0:24:50.480 And the key around that is we really try to 0:24:50.520 --> 0:24:54.320 build a kind of a sandbox that the parents can 0:24:54.720 --> 0:24:57.520 ensure they feel safe putting their kids in that environment. 0:24:57.840 --> 0:25:01.080 For example, on our tablets, all apps that are available 0:25:01.119 --> 0:25:04.160 through Kids Plus don't have any embedded advertising in them. 0:25:04.160 --> 0:25:07.080 And I think the same thing's true with Alexa and 0:25:07.160 --> 0:25:10.240 Generative AI, that the AI has to be aware of 0:25:10.320 --> 0:25:13.120 the age group that it is talking to. So if 0:25:13.760 --> 0:25:16.840 a child that's six years old asked where do babies 0:25:16.880 --> 0:25:19.119 come from, it's going to give a different, more parent 0:25:19.160 --> 0:25:21.480 friendly answer than if an adult asked that question. 0:25:22.640 --> 0:25:25.920 I know chatbots are certainly having their moment. Generative AI 0:25:26.119 --> 0:25:28.879 seems to be the phrase we can't stop talking about. 0:25:28.920 --> 0:25:32.439 But you guys with Alexa, with the echoes, chatbots have 0:25:32.440 --> 0:25:35.199 been around with you for a minute. I'm curious what 0:25:35.280 --> 0:25:37.560 you think at this moment, in time of all the 0:25:37.600 --> 0:25:41.719 calls for regulation around Generative AI and chatbots is an 0:25:41.720 --> 0:25:44.199 industry that you guys have clearly been in and I 0:25:44.240 --> 0:25:49.440 think I remember Amazon asking for regulation around facial recognition software. 0:25:49.840 --> 0:25:51.280 What's your take on AI these days? 0:25:51.320 --> 0:25:52.720 Are you going to go to Congress and say, hey, 0:25:52.800 --> 0:25:53.800 you need to help us out here. 0:25:54.680 --> 0:25:54.880 Yeah. 0:25:54.920 --> 0:25:58.320 I think there's a wide spectrum of what AI can deliver, 0:25:58.480 --> 0:26:00.159 and you know, on one end of the spectrum, when 0:26:00.200 --> 0:26:04.199 you start talking about these generative AI techniques and assistance 0:26:04.600 --> 0:26:07.680 and things like that, I think there's very much room 0:26:07.800 --> 0:26:10.560 for regulation and we think that we want that to 0:26:10.600 --> 0:26:13.520 happen as Amazon, there are other sides that are just 0:26:13.640 --> 0:26:17.560 not as risky, and think about things like fraud detection 0:26:17.720 --> 0:26:20.119 and then those kinds of places you probably want to 0:26:20.160 --> 0:26:22.479 have less regulation so you can keep the speed of 0:26:22.520 --> 0:26:25.960 invention happening and protect consumers with those AI techniques. 0:26:26.560 --> 0:26:29.000 But in the long run, we think for the. 0:26:28.760 --> 0:26:32.240 More complicated use scenarios that regulation is needed and we're 0:26:32.240 --> 0:26:33.000 big supporters. 0:26:33.760 --> 0:26:35.399 I want to go back to products for a moment, 0:26:35.440 --> 0:26:38.080 because I'm so glad that Alex brought up Alexa and 0:26:38.119 --> 0:26:40.720 you did as well. When you talk about generative AI, 0:26:41.200 --> 0:26:43.440 can you give us a sense of what capabilities are 0:26:43.480 --> 0:26:45.560 going to be first through the door as you try 0:26:45.600 --> 0:26:48.880 to upgrade Alexa and make it more prevalent in people's lives. 0:26:49.640 --> 0:26:52.280 What are you doing to make Alexa smarter? Essentially? 0:26:53.359 --> 0:26:55.200 Yeah, well, the first thing we hit a big milestone. 0:26:55.200 --> 0:26:59.040 We've now sold well over half a billion Alexa enabled devices, 0:26:59.119 --> 0:27:01.560 and last week we announced the Echo pop here. This 0:27:01.640 --> 0:27:03.560 is the first product I've ever brought home that my 0:27:03.880 --> 0:27:06.199 daughter said was adorable, So I'm very proud of the 0:27:06.200 --> 0:27:08.880 team's ability to do that. But with over a half 0:27:08.920 --> 0:27:11.919 a billion end points, we have a great access to 0:27:12.000 --> 0:27:15.879 customers and we are using generative AI techniques to improve 0:27:15.920 --> 0:27:18.520 it every day. And I'll give you an example, which 0:27:18.560 --> 0:27:20.479 is on the back end, we have a large language 0:27:20.520 --> 0:27:23.880 model that runs that takes multiple pieces of information from 0:27:23.960 --> 0:27:27.840 various parts of the web and own our own repositories. 0:27:27.320 --> 0:27:29.080 And comes up with a concise answer. 0:27:29.200 --> 0:27:31.560 So if if a child asks a homework question or 0:27:31.600 --> 0:27:34.200 a parent asked a question, then we give a better 0:27:34.320 --> 0:27:37.359 answer than we did just weeks ago. And this is 0:27:37.440 --> 0:27:40.000 all because of the power of these large language models. 0:27:40.000 --> 0:27:41.440 And over the course of time, you're going to see 0:27:41.480 --> 0:27:43.680 us roll out even more and alex is just going 0:27:43.680 --> 0:27:45.679 to get more proactive and more conversation. 0:27:46.720 --> 0:27:49.280 David, I have to ask about Astro, the adorable home 0:27:49.400 --> 0:27:52.679 robot that was released as a prototype. Is everyone going 0:27:52.680 --> 0:27:54.080 to be able to get their hands on Astros? Their 0:27:54.119 --> 0:27:56.000 water release coming up for that product. 0:27:56.840 --> 0:27:59.720 We continue to make progress on Astro. We're shipping a 0:27:59.720 --> 0:28:02.200 lot of them every week now. We've kind of ramped 0:28:02.280 --> 0:28:04.720 up the manufacturing, but we're still an invite. There's still 0:28:04.760 --> 0:28:07.680 a few areas that we're working on in terms of navigation, 0:28:08.480 --> 0:28:11.240 but it seems like it's a pretty tractable problem right now, 0:28:11.280 --> 0:28:13.960 and I would anticipate it to go into wide release 0:28:14.000 --> 0:28:16.720 over the course of the not too far in the 0:28:16.760 --> 0:28:19.600 distant future, as we get through the last of the issues. 0:28:19.640 --> 0:28:22.399 But I will tell you that customers are loving the product. 0:28:22.440 --> 0:28:25.640 We've had over three hundred thousand people request invites. We're 0:28:25.680 --> 0:28:29.800 shipping lots every week, and customers have kind of if 0:28:29.840 --> 0:28:31.840 there was a spectrum of products on your phone was 0:28:31.880 --> 0:28:34.560 on one end and PET was on the other, Astro 0:28:34.800 --> 0:28:37.000 is kind of closer to the PET end of the 0:28:37.040 --> 0:28:39.760 spectrum that it is pure iPhone good stuff. 0:28:39.880 --> 0:28:40.920 David really appreciate it. 0:28:41.240 --> 0:28:44.320 Talking products with David Limp, we talked about Astro, the Echo, 0:28:44.400 --> 0:28:46.600 and of course they are a new fire tablet as well. 0:28:46.640 --> 0:28:47.360 Thank you so much. 0:28:48.280 --> 0:28:51.240 Coming up, Generative AI in Creative Cloud. We're going to 0:28:51.280 --> 0:28:54.280 speak with Adobe's president of Digital Media Business about its 0:28:54.320 --> 0:28:57.720 new feature for users of Photoshop. But before we go 0:28:57.720 --> 0:28:59.560 to break, let's take a look at how Adobe shares 0:28:59.560 --> 0:29:02.320 are performed right now. Little change on the day off 0:29:02.680 --> 0:29:04.800 just largely this is Bloomberg. 0:29:23.560 --> 0:29:25.080 It's time now for talking tech. 0:29:25.240 --> 0:29:27.600 First up, yealf shares are on track to rise the 0:29:27.640 --> 0:29:30.000 most since August, since a Wall Street Journal report that 0:29:30.120 --> 0:29:32.720 an activist investor has called for the company to look 0:29:32.760 --> 0:29:36.520 into a sale and other strategic options. TCS Capital Management 0:29:36.600 --> 0:29:39.640 plans that deliver a letter to Yelp's board today to 0:29:39.760 --> 0:29:42.240 make the case for a sale, arguing that the firm 0:29:42.240 --> 0:29:45.479 could fetch more than double its current share price plus. 0:29:45.520 --> 0:29:48.200 Ali Baba's cloud division has begun a round of job 0:29:48.240 --> 0:29:50.760 cuts that could reduce its staff by about seven percent. 0:29:51.080 --> 0:29:53.600 It's all a part of its overhaul of the business 0:29:53.640 --> 0:29:56.600 at preparing the once fast growing unit for a spinoff 0:29:56.640 --> 0:29:59.800 and an eventual IPO, China's largest cloud service, has begun 0:29:59.840 --> 0:30:02.560 in forming affected staff on the layoffs and is offering 0:30:02.640 --> 0:30:06.960 several employees or transfers to other parts of the Alibaba empire, 0:30:07.600 --> 0:30:11.520 and Apple clashing with the European Union over a fourteen 0:30:11.560 --> 0:30:15.600 billion dollar tax deal. The iphonemaker and Ireland hitting back 0:30:15.680 --> 0:30:18.960 at the EUSE anti trust watchdog, saying they made legal 0:30:19.120 --> 0:30:22.520 errors when they concluded Apple was given vast amounts of 0:30:22.640 --> 0:30:26.200 unfair tax aid from Ireland and issued an order to 0:30:26.320 --> 0:30:28.280 repay that money. 0:30:28.680 --> 0:30:31.120 All right, let's talk about Adobe alex because it is 0:30:31.160 --> 0:30:34.280 taking its generative aim models to the next level by 0:30:34.280 --> 0:30:37.760 integrating the Generative Fill tool into its popular Photoshop software. 0:30:38.120 --> 0:30:39.080 Users will now. 0:30:38.920 --> 0:30:41.360 Have a creative code pilot to help with precision and 0:30:41.400 --> 0:30:44.200 speed up production when they use Photoshop. For more on this, 0:30:44.240 --> 0:30:46.560 we're joined by David Wadwani. He is Adobe's president of 0:30:46.600 --> 0:30:49.880 Digital Media Business. David good to speak with you. Let's 0:30:49.880 --> 0:30:52.200 just start with the generative Phill tool and if you 0:30:52.240 --> 0:30:54.560 could tell us how in practice it would work and 0:30:54.560 --> 0:30:58.160 how would meaningfully change the end product and perhaps create 0:30:58.200 --> 0:30:59.920 demand for new uses of the software. 0:31:00.680 --> 0:31:03.920 Absolutely, Scarlett, thank you for having me on. Today's a 0:31:03.960 --> 0:31:08.080 big day for Adobe with the introduction of generative technology 0:31:08.120 --> 0:31:12.080 going into Photoshop for the first time. We actually launched Firefly, 0:31:12.160 --> 0:31:16.000 which is our core generative capabilities seven weeks ago as 0:31:16.000 --> 0:31:19.760 a standalone capability, so people could create images, they could 0:31:20.520 --> 0:31:24.360 create text effects. Today, the massive step forward for us 0:31:24.360 --> 0:31:26.800 and the industry is that we've taken that and we've 0:31:26.920 --> 0:31:30.320 natively integrated it into our Creative Cloud applications, starting with 0:31:30.320 --> 0:31:34.160 Photoshop first. So now someone working in Photoshop can, as 0:31:34.160 --> 0:31:36.920 you see on the screen here, start to affect the 0:31:36.960 --> 0:31:41.720 images and save hours of work simply by using text 0:31:41.800 --> 0:31:45.360 to help generate and fill information around it. And we 0:31:45.480 --> 0:31:48.240 do that in a way that leverages all of the 0:31:48.280 --> 0:31:51.480 authoring capabilities of Photoshop, including its layers, so that the 0:31:51.560 --> 0:31:54.800 work enables a lot more iteration, a lot more exploration, 0:31:54.840 --> 0:31:58.160 and a lot more productivity because of the way people 0:31:58.240 --> 0:32:00.320 are able to use it in their existing work flows. 0:32:00.560 --> 0:32:02.400 Right, And I know that Adobe is all about serving 0:32:02.440 --> 0:32:05.880 the creative community. I know also that Adobe ignited some 0:32:06.000 --> 0:32:09.440 anger earlier this year for potentially training AI models on 0:32:09.600 --> 0:32:11.080 user files by default. 0:32:11.800 --> 0:32:13.720 I know that that's been resolved. What did you learn 0:32:13.720 --> 0:32:14.720 from that episode? 0:32:15.800 --> 0:32:16.920 Communication is key. 0:32:17.400 --> 0:32:21.880 We've never trained on user files that are part of 0:32:21.960 --> 0:32:26.880 Creative Cloud. We've been incredibly transparent through throughout this process 0:32:26.920 --> 0:32:29.640 and in fact, I think we've taken industry leading position 0:32:29.720 --> 0:32:32.760 on this. Everything that we've used to train our models, 0:32:33.520 --> 0:32:36.760 we have absolute right to use it, so it's you know, 0:32:37.040 --> 0:32:40.360 and we are we have the complete origin of that content, 0:32:40.400 --> 0:32:42.880 so that we've been able to be completely transparent with 0:32:42.920 --> 0:32:46.520 everyone how our models are trained. We've also been able 0:32:46.560 --> 0:32:49.600 to you know, to announce that because we know where 0:32:49.600 --> 0:32:53.760 the content is coming from, principally Adobe Stock. We are 0:32:53.840 --> 0:32:58.400 also going to be compensating the contributors for the benefits 0:32:58.440 --> 0:33:00.800 that we get and the industry gets from the content. 0:33:00.840 --> 0:33:04.280 So we're very excited about how this can be positive. 0:33:03.840 --> 0:33:07.560 For creators now, David, I think that incident is a 0:33:07.560 --> 0:33:11.120 good example of just how sensitive folks are approaching the 0:33:11.240 --> 0:33:14.840 use of AI in creation of assets. When I think 0:33:14.840 --> 0:33:18.000 about kind of the impact outside of Adobe of what 0:33:18.080 --> 0:33:21.200 your customers are using your products for, I have to 0:33:21.200 --> 0:33:22.800 ask the question that I think a lot of folks 0:33:22.800 --> 0:33:25.760 are asking these days when it comes to AI misinformation, 0:33:25.840 --> 0:33:28.959 when it comes to tools to creating that misinformation, Where 0:33:29.120 --> 0:33:32.760 is the role of folks like yourself in making sure 0:33:32.960 --> 0:33:36.800 that we don't have kind of AI generated misinformation out 0:33:36.800 --> 0:33:39.640 in the world. How is Adobe thinking about what I'm 0:33:39.680 --> 0:33:42.520 sure will continue to be a tricky issue as generative 0:33:42.560 --> 0:33:45.360 AI really gets into the hands of people at large. 0:33:46.320 --> 0:33:48.720 Yeah, I think we all in the tech industry you 0:33:48.760 --> 0:33:52.320 need to take a very lenient position on working with 0:33:52.440 --> 0:33:55.960 governments and regulators to address this issue. So our position 0:33:56.040 --> 0:33:58.000 has been and we've worked with both the White House 0:33:58.000 --> 0:34:01.720 and Capitol Hill. We've also been very involved with the 0:34:02.000 --> 0:34:05.160 You with their AI Bill of Rights, and we believe 0:34:05.320 --> 0:34:08.040 that the right approach she here is to do something 0:34:08.080 --> 0:34:12.440 called content credentials. What content credentials effectively does is it's 0:34:12.480 --> 0:34:16.160 a nutrition label for every piece of content you see online. 0:34:16.239 --> 0:34:19.200 And we make sure that anything that flows through our products, 0:34:19.280 --> 0:34:22.680 whether it's the AI generated capabilities of Firefly or whether 0:34:22.719 --> 0:34:27.080 it's our core flagship applications like Photoshop, have the providence 0:34:27.120 --> 0:34:29.560 are the origin of all that content in it, so 0:34:29.600 --> 0:34:32.759 that when someone sees it ultimately on a website, they 0:34:32.760 --> 0:34:34.480 can go and look at it and say, well, what 0:34:34.600 --> 0:34:36.640 was this and how was it generated, so they can 0:34:37.120 --> 0:34:39.960 use their own judgment about whether this is content that 0:34:40.000 --> 0:34:42.400 they want to depend on or content that they don't trust. 0:34:43.400 --> 0:34:44.879 So I spent a lot of time in the social 0:34:44.920 --> 0:34:46.840 media space. I spend a lot of time with creators 0:34:46.840 --> 0:34:47.680 and advertisers. 0:34:47.680 --> 0:34:48.960 They're trying to move really fast. 0:34:49.239 --> 0:34:51.400 They are looking at things like cap cut, some of 0:34:51.400 --> 0:34:54.520 your competitors, Canva. There's a slew of new kind of 0:34:54.560 --> 0:34:57.200 startups who are pushing in and seemingly trying to take 0:34:57.239 --> 0:35:02.719 some of Adobe's traditional creations. How are you facing competition 0:35:02.760 --> 0:35:05.600 from these kind of younger players who perhaps not providing 0:35:05.640 --> 0:35:07.680 that digital provenance that you guys are committing to. 0:35:08.600 --> 0:35:11.560 Well, first of all, you know, the Adobe core business 0:35:11.560 --> 0:35:14.160 for creative and our business overall continues to grow. I 0:35:14.160 --> 0:35:17.319 think we as you probably saw on our last earnings call, 0:35:17.400 --> 0:35:19.719 we had a great quarter, we beat and then we 0:35:19.800 --> 0:35:23.120 raised our guidance for the year. So the core machinery 0:35:23.280 --> 0:35:25.439 continues to grow, both in terms of what we're doing 0:35:25.440 --> 0:35:29.120 for creative professionals, but also this massive and growing population 0:35:29.400 --> 0:35:32.760 of creativity for all everyone that's part of the creator economy. 0:35:32.800 --> 0:35:35.440 That are the younger generations and students that are looking 0:35:35.440 --> 0:35:38.680 to add more content that stands out. So we're benefiting 0:35:38.719 --> 0:35:41.440 from all of that. At the foundation, you know, we 0:35:41.480 --> 0:35:43.839 think innovation is key, and we think the way that 0:35:43.920 --> 0:35:47.640 works is having a set of products from Firefly which 0:35:47.680 --> 0:35:50.360 you can use just for fun and enjoy yourself to 0:35:50.400 --> 0:35:54.560 Adobe Express, which is perfect for knowledge workers and creator 0:35:54.920 --> 0:35:58.640 creator professional creator economy all the way to photoshop and 0:35:58.680 --> 0:36:01.759 then enable everyone to sort of create along that continuum 0:36:01.880 --> 0:36:03.840 and enable them to work together on that. So we 0:36:03.920 --> 0:36:07.120 feel very good about the breadth of offerings and the 0:36:07.120 --> 0:36:09.120 onboarding that users have into those offerings. 0:36:09.160 --> 0:36:12.680 Well, speaking of startups, of course, you led the purchase 0:36:12.840 --> 0:36:15.719 of the design startup Figma not so long ago, and 0:36:15.840 --> 0:36:19.400 the US government is preparing a lawsuit to potentially block it, 0:36:19.480 --> 0:36:21.799 and we know the UK has already done. So your 0:36:21.800 --> 0:36:24.680 CEO has said that you're working to convince authorities that 0:36:24.719 --> 0:36:26.920 it's not not anti competitive. 0:36:26.920 --> 0:36:28.280 How's that going very quickly. 0:36:29.320 --> 0:36:32.440 We're cooperating and sharing all the information that we have 0:36:32.600 --> 0:36:35.600 with the regulators around the world. Our core belief and 0:36:35.960 --> 0:36:38.840 continues to be that the substance of the case is 0:36:38.840 --> 0:36:41.400 that this is an adjacency that's good for the industry 0:36:41.400 --> 0:36:44.360 and good for consumers. We see a lot of potential 0:36:44.400 --> 0:36:47.120 benefits and we're confident in the case and we just 0:36:47.120 --> 0:36:48.359 have to let the process play out. 0:36:48.480 --> 0:36:52.319 David Wadwani, president of Digital Media Business for Adobe, Thank 0:36:52.400 --> 0:36:52.960 you more. 0:36:53.000 --> 0:36:55.400 Next, this is Bloomberg. 0:37:02.239 --> 0:37:05.960 TikTok is not available in midland China today. As we 0:37:06.000 --> 0:37:08.840 said many times, the Chinese government has actually never asked 0:37:08.880 --> 0:37:10.960 us for US use of data and we will not 0:37:11.080 --> 0:37:12.360 provide even a vast. 0:37:13.840 --> 0:37:14.560 That was TikTok. 0:37:14.640 --> 0:37:17.400 CEO show too there, speaking during a Bloomberg interview at 0:37:17.440 --> 0:37:20.759 the Qatar Economic Forum in Doha. Now, let's continue that 0:37:20.840 --> 0:37:24.800 conversation about rising US China tensions around tech and AI 0:37:24.960 --> 0:37:27.160 with Linda Moore, President and CEO of tech Net, a 0:37:27.200 --> 0:37:30.520 bipartisan network of tech CEOs and senior executives promoting the 0:37:30.560 --> 0:37:34.960 growth of innovation in this economy. Now, Linda, when I 0:37:35.040 --> 0:37:38.080 think about kind of the dialogue that's gone on between 0:37:38.120 --> 0:37:41.640 the US and China, it's verged from contention to kind 0:37:41.680 --> 0:37:44.279 of techno nationalism. But I think at the end of 0:37:44.280 --> 0:37:46.399 the day, I have a big question as to when 0:37:46.400 --> 0:37:49.759 we will actually see some kind of regulation happen that 0:37:49.840 --> 0:37:52.319 protects the US if that's what lawmakers want. 0:37:52.520 --> 0:37:55.280 What's your take on that specifically on AI. 0:37:55.880 --> 0:37:59.040 Federal policymakers and state policymakers are in fact finding mode 0:37:59.120 --> 0:38:01.759 right now, working closely with them and all of our 0:38:01.800 --> 0:38:04.719 member companies at tech net to make sure they understand 0:38:05.120 --> 0:38:07.800 that the technology can be rolled out in a safe, 0:38:07.920 --> 0:38:11.880 responsible way. We saw an instance yesterday that was very unfortunate. 0:38:12.120 --> 0:38:14.920 We certainly want to avoid that anytime going forward, and 0:38:14.960 --> 0:38:17.239 I think that Twitter probably learned some things from that 0:38:17.320 --> 0:38:20.920 instance and we'll hopefully safeguard it going forward. But all 0:38:20.960 --> 0:38:22.520 of the companies that I work with, and all the 0:38:22.520 --> 0:38:25.759 federal policy makers I work with, understand the great potential 0:38:25.880 --> 0:38:28.520 of AI, especially in the medical realm, and so we 0:38:28.600 --> 0:38:30.680 don't want to, you know. 0:38:30.640 --> 0:38:31.960 Not take advantage of that. 0:38:32.320 --> 0:38:33.960 It can help us solve a lot of issues and 0:38:34.000 --> 0:38:36.640 a lot of problems that we face. But it will 0:38:36.680 --> 0:38:38.600 take some time for federal policy makers to put some 0:38:38.680 --> 0:38:41.040 regulations in place. I think that we'll see that in 0:38:41.080 --> 0:38:41.719 the coming year. 0:38:42.320 --> 0:38:45.400 And you know, Congress has been nothing if not reactive 0:38:45.480 --> 0:38:46.879 when it comes to regulating tech. 0:38:47.040 --> 0:38:47.680 There have been. 0:38:47.600 --> 0:38:52.080 Industries like social media where we've seen whistleblower after executive 0:38:52.239 --> 0:38:56.120 touted down to Capitol Hill with big concerns but no 0:38:56.280 --> 0:39:00.479 actual regulation. Do we need a big moment, a big 0:39:00.520 --> 0:39:03.960 scary moment, for that kind of fact finding mode to 0:39:04.120 --> 0:39:06.600 end and for actual regulation to take place. 0:39:07.360 --> 0:39:09.600 Well, I think that policy makers at the federal level 0:39:09.680 --> 0:39:12.640 are being very wise and that they don't know all 0:39:12.680 --> 0:39:15.239 that they need to know about the technology, and I 0:39:15.239 --> 0:39:17.279 think that they're taking that very seriously. We've seen a 0:39:17.360 --> 0:39:20.760 huge uptick in hearings and people appearing in Congress. 0:39:21.080 --> 0:39:22.880 You saw Sam Altman just recently. 0:39:23.560 --> 0:39:27.160 Others will continue to meet with Majority Leader Schumer and 0:39:27.200 --> 0:39:30.080 also other committee chairs, and also the White House and 0:39:30.120 --> 0:39:33.280 the agencies are also putting forward their own task forces 0:39:33.320 --> 0:39:36.439 on this. I do hope that it's not a big 0:39:36.480 --> 0:39:39.560 scary moment that does, you know, cause everyone to clamp 0:39:39.600 --> 0:39:40.200 down on this. 0:39:40.440 --> 0:39:41.880 I think that all. 0:39:41.760 --> 0:39:46.080 Of our American technology companies are very focused on safe, 0:39:46.160 --> 0:39:50.759 responsible rollout of artificial intelligence. It is already being used 0:39:50.760 --> 0:39:53.480 and used well in lots of instances, and we just 0:39:53.520 --> 0:39:55.840 want to increase that activity and apply it to a 0:39:55.840 --> 0:40:00.160 lot of different really great applications. And policymakers are wisely 0:40:00.239 --> 0:40:03.800 trying to really understand what they don't right now about 0:40:03.800 --> 0:40:05.520 how it can be used and used well. 0:40:06.000 --> 0:40:08.400 Right, we certainly need the right policies in place to 0:40:08.719 --> 0:40:11.840 move forward on that. Sometimes it's easier to identify the 0:40:11.880 --> 0:40:14.040 wrong policies. What would be an example of the wrong 0:40:14.600 --> 0:40:18.400 policy when it comes to regulating, potentially regulating. 0:40:17.960 --> 0:40:21.279 AI well I think that you know, in some instances, 0:40:21.920 --> 0:40:25.040 if you saw just a complete clamp down on there 0:40:25.080 --> 0:40:27.360 will be no use of AI at all, and we 0:40:27.440 --> 0:40:31.120 will be looking for companies to prosecute if that happened. 0:40:31.800 --> 0:40:34.760 That's an extreme situation. I don't see that happening. 0:40:35.120 --> 0:40:37.719 But you know, policy makers, as I mentioned before, they 0:40:37.840 --> 0:40:41.839 very much understand the wonderful potential of AI, how it's 0:40:41.880 --> 0:40:45.640 being used right now to increase output. For example, the 0:40:45.680 --> 0:40:50.480 Madrona vaccine for COVID that was found so rapidly because 0:40:50.520 --> 0:40:54.680 AI can find so many tests and solutions to a problem. 0:40:55.160 --> 0:40:58.080 So there are wonderful applications of this technology, and I 0:40:58.120 --> 0:41:01.160 think that policy makers are wisely under standing that and 0:41:01.239 --> 0:41:03.520 are wanting to take it slow and make sure they 0:41:03.600 --> 0:41:06.479 understand exactly all the things that they don't know, good 0:41:06.520 --> 0:41:09.400 and bad for how it can be used. And American 0:41:09.440 --> 0:41:12.560 technology companies take that very seriously too. 0:41:12.640 --> 0:41:14.600 You've seen all kinds of. 0:41:14.280 --> 0:41:18.239 Frameworks put out, especially by Google and Microsoft that really 0:41:18.320 --> 0:41:22.080 lays out the responsible and safe use of artificial intelligence, 0:41:22.200 --> 0:41:23.759 and I think that that's the right way to go. 0:41:24.080 --> 0:41:26.240 In the meantime, there's a lot of talk of perhaps 0:41:26.280 --> 0:41:29.719 maybe putting together a federal data privacy law that would 0:41:29.719 --> 0:41:33.440 protect the databall consumers and businesses, give people some certainty 0:41:33.680 --> 0:41:35.680 to what extent is europe a model for what to 0:41:35.760 --> 0:41:36.680 do or what not to do? 0:41:36.920 --> 0:41:38.879 Yeah, you know, there are a lot of good things 0:41:38.920 --> 0:41:41.640 to learn from the European model. First of all, they 0:41:41.680 --> 0:41:44.960 made sure that there was one national standard for the continent. 0:41:45.520 --> 0:41:48.760 Right now, we have nine states already that have enacted 0:41:48.760 --> 0:41:52.040 their own privacy laws. California was the first, but a 0:41:52.160 --> 0:41:54.600 to others have followed, And just this year alone we 0:41:54.680 --> 0:41:58.680 had twenty eight states that introduce fifty six different privacy laws. 0:41:59.120 --> 0:42:02.360 TECH that is very involved with federal policymakers on a 0:42:02.440 --> 0:42:05.400 daily basis advocating for one national standard. 0:42:06.120 --> 0:42:06.880 We want one. 0:42:06.800 --> 0:42:10.320 National privacy law that will give all businesses in America 0:42:10.400 --> 0:42:12.160 the rules of the road that they need to adhere 0:42:12.160 --> 0:42:15.520 to their responsibilities and also so consumers will know their 0:42:15.600 --> 0:42:18.960 data is protected and they know exactly what to expect. 0:42:19.280 --> 0:42:20.040 Thank you so much. 0:42:20.120 --> 0:42:23.160 Linda Moore is president and CEO of TechNet in San Francisco. 0:42:23.560 --> 0:42:25.759 And that does it for this edition of Bloomberg Technology. 0:42:26.520 --> 0:42:28.840 Don't forget to check out the Bloomberg Technology podcast. You 0:42:28.880 --> 0:42:31.840 can find it on the terminal online, on apples, Spotify, 0:42:31.880 --> 0:42:34.200 and iHeart this is Bloomberg.