Speaker 1: From the heart of where innovation, money and power Colli
Speaker 1: in Silicon Valley and beyond. This is Bloomberg Technology with
Speaker 1: Emily jay I. Remember we chang in San Francisco and
Speaker 1: this is Bloomberg Technology coming up for the next hour.
Speaker 1: Alphabet's earnings mostly in line with estimates a sigh of
Speaker 1: relief for those concerned about the digital ad market. But
Speaker 1: the same can't be said from Microsoft, which posted the
Speaker 1: slowest sales growth. Since we will look into these mixed results. Plus,
Speaker 1: the fifty two billion dollar Chips Act is one step
Speaker 1: closer to President Biden's desk. This means US tech companies
Speaker 1: won't have to rely so much on Taiwan, where how
Speaker 1: speaker Nancy Pelosi may visit next month Chinese government not
Speaker 1: happy about it. Will have the latest from Capitol Hill
Speaker 1: and most coordinate for cryptocurrencies. The SEC is investigating coin
Speaker 1: based over possible trading of unregistered securities, accusing a former
Speaker 1: coin based manager of insider trading just last week. We
Speaker 1: will have all the details. We'll get to all of
Speaker 1: that in a moment, but first I want to get
Speaker 1: a look at earnings. Bringing Dan Newman, analysts for the
Speaker 1: research firm future Um all right, Dan, what are your
Speaker 1: big picture takeaways? Microsoft doesn't look good. They highlighted the
Speaker 1: strong dollar, which which Google highlighted as well, though their
Speaker 1: results looking somewhat better. Yeah, I think there were narrow
Speaker 1: misses across the board, Emily. I think people have been
Speaker 1: kind of waiting to see when do we finally hit
Speaker 1: that inflection point where the beats stop. You know, the
Speaker 1: market has been selling like these companies haven't been performing
Speaker 1: for the past few quarters, and actually they have been
Speaker 1: performing quite well. Now we've got a number of factors.
Speaker 1: You've got effects, You've got the Ukraine, Russia, you've got
Speaker 1: shut downs in China, and all these were impacting Microsoft numbers.
Speaker 1: But if you look, they were pretty narrow misses on
Speaker 1: both top and bottom line. I think Microsoft said there's
Speaker 1: something like a billion dollars tied to the shutdowns that
Speaker 1: I mentioned in China, to the f X impact as
Speaker 1: well as the Ukraine Russia, and that's actually about six
Speaker 1: cents which would have taken them to hitting that EPs target.
Speaker 1: The Cloud number is still good, it's it's decelerating little
Speaker 1: bit um and you saw a dynamics through the RP,
Speaker 1: which is something I've been looking close as at enterprise software.
Speaker 1: Barring that number stayed really strong, but some of the
Speaker 1: other areas, again, it just seemed like narrow misses everywhere,
Speaker 1: Emily and so that was Microsoft, And of course what
Speaker 1: you mentioned with with Google is the ad market seemed
Speaker 1: to be stronger with Alphabet than people had expected. It
Speaker 1: has slowed, But the question is do people outside of
Speaker 1: us who are watching this every day realize we're in
Speaker 1: a recession. If you saw Prime Day, if you look
Speaker 1: at the advertising spend, it looks like people are still
Speaker 1: shopping shopping. Indeed, I just got off the phone with
Speaker 1: Alphabet CFO with poor At and she used that word
Speaker 1: uncertainty a number of times. I'm expecting to get even
Speaker 1: more color on the earnings call with so In Darperty
Speaker 1: about just what kind of uncertainty. But here she says,
Speaker 1: uncertainty is the best way to characterize what we're seeing.
Speaker 1: But the reality of the data is that it's complicated.
Speaker 1: The results reflect the lapping of significant growth last year
Speaker 1: plus uncertainty in the global economic environment. And what she
Speaker 1: talked about was that there are a variety of factors
Speaker 1: at play here, but it's really challenging to disaggregate them.
Speaker 1: So you know, they're continuing to use this word uncertainty.
Speaker 1: What do you take away from that, Well, it's the
Speaker 1: reason we're having a hard time deciding whether or not
Speaker 1: we're in recession right now. You see some of the
Speaker 1: numbers indicate that there's still strength, there's some growth across tech,
Speaker 1: because again, all these numbers are growth on a youear
Speaker 1: over your basis. So we thought at all this digital
Speaker 1: transformation acceleration, and these these numbers are better now. They're
Speaker 1: decelerated growth for both Google and for Microsoft, but they're
Speaker 1: up on a year over your basis. So people are
Speaker 1: spending more money on technology, more money on advertising than
Speaker 1: a year ago when we thought the market was growing
Speaker 1: at an explosive rate. So now we're entering this slowdown period.
Speaker 1: If you've got inflation, we've got an f X, we've
Speaker 1: got interest rate hikes. And I think some of the
Speaker 1: reason that there's some enthusiasm about these misses as we've
Speaker 1: been waiting for this, we've been waiting to see some
Speaker 1: of this FED policy, some of the monetary policy that's
Speaker 1: coming into place. Actually uh, having companies start to slow down,
Speaker 1: having guided start to slow down and say, look, some
Speaker 1: of what's happening is working. The demand is slowing, but
Speaker 1: I still lean that enterprise tech, I still lean that
Speaker 1: e commerce and platforms will be remarkably strong because we've
Speaker 1: become hyper dependent on them throughout the pandemic. I don't
Speaker 1: see that changing, and companies that are gonna want to
Speaker 1: wade their way through this slow in the economy are
Speaker 1: going to be looking to technology to help automate, to
Speaker 1: invest in AI and utilize cloud technologies to actually scale
Speaker 1: their businesses with less big overhead resources and of course
Speaker 1: slowed hiring, which means technology is gonna have to take
Speaker 1: the runt of the way now. When it came to
Speaker 1: advertising specifically, she talked about the growth driven by travel
Speaker 1: and retail, which continued to be strong. Makes sense, of course,
Speaker 1: as we are coming out hopefully, hopefully, hopefully of a pandemic,
Speaker 1: But she did talk about the pull back and she
Speaker 1: used that word pulled back by some advertisers, reflecting uncertainty
Speaker 1: about a number of factors they view as again, as
Speaker 1: I said, challenging to disaggregate. What do you make of
Speaker 1: her use of that word pulled back because everybody is wondering,
Speaker 1: is what we saw a snap in Twitter going to
Speaker 1: impact Google as well. Is Google somehow um immune to
Speaker 1: this given that it is such a broad based business
Speaker 1: or not. Well, the numbers indicate that there's clearly prioritization,
Speaker 1: and so Google seems to be above the fold. Whereas
Speaker 1: we saw what happened to Snap and what's happened to
Speaker 1: Met over the past few quarters, where there has been
Speaker 1: more pulled back, and of course ruthport I was saying,
Speaker 1: they are seeing some pullback too, but that's more deceleration
Speaker 1: than overall slowing of growth altogether. Uh, the indicators here
Speaker 1: are that companies that are going to go online still
Speaker 1: believe Google is their best bet, if not, you know,
Speaker 1: one of their best bets, and that's why we're continuing
Speaker 1: to see the spend there. I do think some companies
Speaker 1: that understand what's going on are starting to look at
Speaker 1: at you know, whether that slowing hiring, slowing addicts expense.
Speaker 1: We're seeing that across the board. We've heard the announcements
Speaker 1: from companies that are going to do less hiring, that
Speaker 1: are going to spend less on advertising, and that's part
Speaker 1: of this period of economic uncertainty and slow down. So
Speaker 1: none of this is surprising. I think smart companies understand
Speaker 1: you cannot entirely save your way to growth in the future,
Speaker 1: but you might want to slow down temporarily until we
Speaker 1: get a good handle of what's going on here. And
Speaker 1: there are so many factors, so much inconsistency in the data,
Speaker 1: and that's why, like I said, we're having a hard
Speaker 1: time making final decisions. The Feds having hard time, The
Speaker 1: markets are having hard time because we're seeing some numbers
Speaker 1: look good and some numbers look incredibly bad or at
Speaker 1: risk right now, right and maybe even Google's having a
Speaker 1: hard time, and clearly Microsoft is having a hard time.
Speaker 1: I did ask her, by the way, about competition from
Speaker 1: TikTok in particular, and they doubled down on clearly people
Speaker 1: want to consume short form videos. So she talked about
Speaker 1: YouTube shorts, and she talked about focusing on engagement and
Speaker 1: the experience and and the hope is that monetization will
Speaker 1: come later. Okay, Dan Newman, if you sure, thanks for
Speaker 1: helping us to unpack a lot of very difficult and
Speaker 1: challenging the circumstances to separate out appreciate it well. Twitter
Speaker 1: Neolon Musk are fighting about the start date for their
Speaker 1: Delaware trial. Twitter wants to begin October ten, Musque asking
Speaker 1: for October seventeen. A lawyer for Musk says the social
Speaker 1: media platform isn't producing the requested documents in a timely way.
Speaker 1: He also said Twitter is resisting turning over raw data,
Speaker 1: causing a quote log jam in the production of evidence.
Speaker 1: The defense needs coming up the Senate to vote on
Speaker 1: the All Important Chips Act, as Ali Baba pushes to
Speaker 1: list in Hong Kong amid rising tensions between the US
Speaker 1: and China. The latest from d C. Next, this is
Speaker 1: Bloomberg today the Senate advance of fifty two billion dollar
Speaker 1: bill that would bolster the U S semi can after
Speaker 1: industry setting it up for a final vote. This comes
Speaker 1: as how Speaker Nancy Pelosi seems dead said on plans
Speaker 1: to visit Taiwan next month. Beijing as warned Pelosi not
Speaker 1: to come. The Chinese government, of course, is long considered
Speaker 1: Taiwan to be part of its territory. It's also the
Speaker 1: chip capital of the world. Bloomberg Government's Emily Wilkins has
Speaker 1: the details from Capitol Hill. So a lot going on here,
Speaker 1: as always in the U S. China relationship. Emily, let's
Speaker 1: start with the Chips act. Just how close are we? So?
Speaker 1: Right now, the Senate has cleared two procedural votes, which
Speaker 1: means that all they have to do is now actually
Speaker 1: pass the legislation. They're looking at doing that tomorrow. Remember,
Speaker 1: there's a lot of Senate rules about timing and stuff
Speaker 1: that prevents them from doing it right now, But at
Speaker 1: this point, it absolutely seems like they have the votes.
Speaker 1: We've seen a lot of bipartisan support for this one,
Speaker 1: a number of Republicans joining Democrats on these votes. In fact,
Speaker 1: even though we do have a couple of Democrats who
Speaker 1: aren't here right now because they've tested positive for COVID nineteen,
Speaker 1: it still seems like this is going to have this
Speaker 1: support to clear the Senate. From there will move on
Speaker 1: to the House, where the House leaders have promised a
Speaker 1: very quick vote on This really shows that this is
Speaker 1: something that folks want to get done, especially before the
Speaker 1: House is scheduled to leave town on Friday for a
Speaker 1: long recess. Difficult to isolate, but how will this particular
Speaker 1: bill impact US China tentions? I mean, to a certain extent.
Speaker 1: This bill initially start out as something that was supposed
Speaker 1: to really bolster US competitiveness with China, and it will
Speaker 1: still do that in some regards making sure that the
Speaker 1: US is able to produce semi conductors, boasting the National
Speaker 1: Science Foundation, But it's not really the strong anti China
Speaker 1: bill that it was at the beginning. Most provisions have
Speaker 1: gotten stripped out in the interest of time and getting
Speaker 1: something done quickly. There really aren't that many days left
Speaker 1: for lawmakers to do work before the November midterm elections,
Speaker 1: and so honestly, this is probably a more China friendly
Speaker 1: bill than what we initially began to see and to
Speaker 1: start out with. But that doesn't mean that President Biden
Speaker 1: is going to have an easy fall with as a
Speaker 1: chi Jinping. Biden said he'd be speaking with the Chinese
Speaker 1: president within the next ten days, and of course, something
Speaker 1: that's going to be coming up during that call is
Speaker 1: how Speaker Nancy Pelosi's proposed trip to Taiwan. On this
Speaker 1: proposed trip to Taiwan, this would be the first of
Speaker 1: its kind in twenty five years. We've heard these warnings
Speaker 1: from the Chinese government do not come, but it seems
Speaker 1: like this trip is going to happen. What do you
Speaker 1: make of this and how this trip will impact the
Speaker 1: U S China relationship. So one notable thing is that
Speaker 1: President Buden was actually a little bit hesitant on Pelosi
Speaker 1: going on this trip. But you have heard a lot
Speaker 1: of lawmakers from her own party and from Republicans saying
Speaker 1: that Pelosi shouldn't back down to China, shouldn't back down
Speaker 1: to Beijing's concerns, and should absolutely go. You heard a
Speaker 1: Republican Senate Minority Leader, Mitch McConnell say today that Pelosi
Speaker 1: would be handing China a victory if she was to
Speaker 1: cancel her trip now, and you've heard similar support from
Speaker 1: other Democrats and Republicans. So it seems like at this point,
Speaker 1: even though the executive branch is a little bit timid
Speaker 1: about what the fallout from this trip could be, a
Speaker 1: lot of Pelosi's colleagues here in Congress are absolutely supporting
Speaker 1: uh this planned trip all right. Emily Wilkins for us
Speaker 1: at the Capital, Emily, thank you. Meantime, another twist in
Speaker 1: this story, Ali Baba will seek a primary listing in
Speaker 1: Hong Kong, paving the way for investors in China to
Speaker 1: directly buy shares of the company's most prominent e commerce
Speaker 1: company for the first time. This will also in Trench
Speaker 1: Hong Kong as an alternative to US markets. Here to
Speaker 1: discuss global lexi TS Director of Research, Pedro Palindroni. Pedro,
Speaker 1: I remember interviewing Jack mob the CEO of Ali Baba
Speaker 1: at the time, on the floor of the New York
Speaker 1: Stock Exchange, And here we are years later, Ali Baba
Speaker 1: proposing this secondary listing in Hong Kong. Why now, yeah,
Speaker 1: well thanks for having me, Emily. You know, if we
Speaker 1: step back for a second, Alibaba is essentially facing two
Speaker 1: dimensions of regulatory rest right. First, they're getting fine or
Speaker 1: punished by domestic regulators for monopolistic practices or even creating
Speaker 1: national security risk given the large amount of data that
Speaker 1: they have. Right on the second hand, there is a
Speaker 1: risk of getting the listed from the United States sometime
Speaker 1: in four because of these Holding Foreign Companies Accountable Act
Speaker 1: and the fact that it's essentially threadning to exclude Chinese
Speaker 1: companies of US exchanges unless they comply with clear auditing
Speaker 1: rules that apply to all the US listed companies. And
Speaker 1: I think this dual listing move is first and foremost
Speaker 1: a hedge against the the listing risk, but it can
Speaker 1: also help a little bit with the domestic regulatory risk. Right. So,
Speaker 1: on the the list in front, we've seen some willingness
Speaker 1: from both China and the United States to resolve the conflict. Actually,
Speaker 1: just a few months ago, the Vice Premier you He
Speaker 1: gave a speech where he expressed Chinese willingness to cooperate
Speaker 1: on this issue. However, the reality is that a smooth
Speaker 1: resolution is not a foregone conclusion just yet, and the
Speaker 1: risk of Ali Baba and the four then matter other
Speaker 1: Chinese companies of getting the listed of US exchanges in
Speaker 1: is still real. On the domestic regulatory front, I think
Speaker 1: that we've seen some positive signs lately regarding the eascene
Speaker 1: of the tech crackdown, and I think that by making
Speaker 1: this move, Ali Baba can probably win some positive favor
Speaker 1: coming up from Chinese regulators. So, you know, China clearly
Speaker 1: is hoping to preserve and build up Hong Kong status
Speaker 1: as a global financial hub. In having mainland take giants
Speaker 1: fallback onto the Hong Kong stat change is clearly in
Speaker 1: line with those goals. What do you think this means
Speaker 1: for other US listed Chinese companies? I mean, are we
Speaker 1: going to see a slew of realistics? Yeah, this is
Speaker 1: probably going to encourage the roughly two hundred U s
Speaker 1: traded Chinese A d R companies to to follow suit,
Speaker 1: right from e commerce platforms like JD dot Com or
Speaker 1: Pino Do or even China Search Changine Giant, they do
Speaker 1: Evie company Neil. You know, this move could definitely help
Speaker 1: solidify Hong Kong as as an alternative venue, and it's
Speaker 1: likely going to encourage more more activity over the next
Speaker 1: few months. So what do you see is next here
Speaker 1: in terms of Ali Baba's evolving relationship with its own government,
Speaker 1: the Chinese government, which as we know, over the last
Speaker 1: couple of years has been incredibly challenging. I think that's
Speaker 1: the one of the main reasons of these uh primary
Speaker 1: listing in Hong Kong, right, I think Ali Baba is
Speaker 1: definitely trying to work closer with the government in many regards.
Speaker 1: Were already seeing a lot of policies implemented it by
Speaker 1: Ali Baba to comply with the umbrella of common prosperity
Speaker 1: regulations in China. So I think most likely over the
Speaker 1: next few months will continue to see these large internet
Speaker 1: companies working closely with regulators to avoid all of these
Speaker 1: regulatory risks that we faced as as investors. Over the
Speaker 1: last few years. All right, Pedro Pollen Dronni Global x
Speaker 1: UH Director of Research, thank you so much for joining us. Obviously,
Speaker 1: we'll continue to follow this Ali Baba situation. Meantime, we're
Speaker 1: following new headlines coming in about Twitter. Twitter setting a
Speaker 1: date for a special shareholder vote on the proposed takeover
Speaker 1: by Elon Musk for billion dollars. Of course, we know
Speaker 1: Elon Musk is trying to get out of the deal altogether.
Speaker 1: They're fighting over the date for the trial to start,
Speaker 1: which is looking to sometime in October. But Twitter has
Speaker 1: now set the date of September for a special meeting
Speaker 1: with shareholders. Interesting, of course, given that Elon Musk doesn't
Speaker 1: want this steal to go forward at all. But we've
Speaker 1: got our eyes on September and then the trial coming
Speaker 1: up sometime in October. Now, could Walmart's surprise cut to
Speaker 1: its profit outlook signal doom for e commerce? Consumers have
Speaker 1: little to spend on discretionary goods due to the rising
Speaker 1: costs of food and and gas. Bloomers John Edwards joins
Speaker 1: us now to talk about the state of the e
Speaker 1: commerce industry, and on top of these numbers from Walmart, John,
Speaker 1: we see Shopify cutting ten thousand jobs. This is a
Speaker 1: company that's been riding high over the last couple of years.
Speaker 1: How does this all add up to you? Yeah, well, um,
Speaker 1: I mean Shopify, you know, for one thing was interesting.
Speaker 1: They made a big bet that the shift e commerce
Speaker 1: that we saw during the height of the pandemic was
Speaker 1: going to be long lasting, in fact accelerate, um, you know,
Speaker 1: faster than anybody had had expected before before COVID, and
Speaker 1: that that bet just turned out to be completely wrong.
Speaker 1: They uh, you know, thought that uh, people were not
Speaker 1: going to go back to in person shopping at the
Speaker 1: pace that they did, but people have flocked back to
Speaker 1: stores and so that led to a shop Shopify having
Speaker 1: to cut a bunch of jobs. Um yeah, what is
Speaker 1: what we're seeing here indicate about Amazon results, which we're
Speaker 1: expecting later this week. Yeah, that's gonna be really interesting
Speaker 1: to watch in light of what we heard from Walmart,
Speaker 1: because you know, what Walmart is seeing there is is
Speaker 1: not so much that uh spending overall is slowing down,
Speaker 1: but that the mix is shifting in a way that
Speaker 1: is going to cut into their margins. So people are
Speaker 1: spending you know, less on big ticket items. Less on
Speaker 1: uh you know, discretionary you know, sort of splurge items
Speaker 1: and shifting their spending to food fuel things that are
Speaker 1: you know, staples that people have to have. Uh. And
Speaker 1: so that really is where Walmart's profit warning came from.
Speaker 1: You know. In fact, they raised their expectation for revenue overall,
Speaker 1: but the mix is such that it's going to be
Speaker 1: much less profitable revenue for them. So that's definitely going
Speaker 1: to be something to watch from Amazon on on on Thursday,
Speaker 1: because uh, you know, Amazon obviously likes to sell a
Speaker 1: lot of those same big ticket items that people are
Speaker 1: starting to shy away from. Now. We were speaking about
Speaker 1: this with respect to Alphabet and Microsoft earnings earlier. I
Speaker 1: spoke with Alphabet CFO with Corad who used the word
Speaker 1: on uncertainty multiple times. We're seeing these mixed results, you know,
Speaker 1: slightly below estimate results, and it's causing some confusion about
Speaker 1: whether or not we're already in a recession. Are we
Speaker 1: according to these numbers that we're seeing from these e
Speaker 1: commerce companies? Are we? Uh, you know, it's hard to say,
Speaker 1: but I would say no for now. I think, um,
Speaker 1: you know, again, it's it's less a complete slowdown and
Speaker 1: spending and more a shift in the mix. Um, you know,
Speaker 1: and you know, high inflation is biting everyone and it
Speaker 1: and it's so it's changing the prior days that people
Speaker 1: have in terms of what they're spending on. But as
Speaker 1: we saw, you know, in the earnings from companies like McDonald's, UM,
Speaker 1: Coca Cola, PepsiCo a couple of weeks ago, Uh, people
Speaker 1: are still spending on you know, things like food going out,
Speaker 1: you know, buying soda and chips and things. So uh,
Speaker 1: you know, it's it's more of a change in the
Speaker 1: mix and less of a complete slowdown. All right, Well,
Speaker 1: the story is not over, John. We're gonna be watching
Speaker 1: those Amazon results coming out later this week. Thank you
Speaker 1: so much, Bloomberg. John Edwards, appreciate your insights there. Meantime,
Speaker 1: another story we're watching, Russia says it will opt out
Speaker 1: of the International Space Station after Russia planning to focus
Speaker 1: on building its own orbital outpost, according to its new
Speaker 1: space chief. This move coming amid tentions between Russia and
Speaker 1: the West over the war on Ukraine. Russia says it
Speaker 1: will fulfill its obligations to other partners at the space
Speaker 1: station before it leaves the project, and NASA says the
Speaker 1: I s S is scheduled to be decommissioned to crash
Speaker 1: into the Pacific Ocean anyway. By welcome back to Bloomberg Technology.
Speaker 1: I'm Emily check in San Francisco. Let's get back to
Speaker 1: our top stories of the day. I want to dig
Speaker 1: it now to the state of cybersecurity and pal Alton
Speaker 1: Network's Threat Intelligence and Security Consulting Team or unitfory too.
Speaker 1: Is that with a new report into cyber crime trends
Speaker 1: and predictions and the impact of declining economic conditions, how
Speaker 1: are these two connected. Let's ask Wendy with More, senior
Speaker 1: vice president and head of pal Alton Networks Unit forty two.
Speaker 1: So on the one hand, uh, cyber attacks, cyber threats
Speaker 1: seemed to be quieter at the moment. Why is that.
Speaker 1: That's a great question, Emily, it does seem that way.
Speaker 1: I don't know that that's actually the case. I think
Speaker 1: what's happening is that we haven't seen these mega breaches
Speaker 1: posted in the news. That's usually good news. Actually that
Speaker 1: we are not seeing as any of these massive leaks
Speaker 1: in the news. But the reality is that there is
Speaker 1: a new ransomware victim posted online with their data that
Speaker 1: are being exhorted every four hours, we see the new
Speaker 1: victims being posted on leak sites. But you are reporting
Speaker 1: there could be an uptick in cybercrime because of the
Speaker 1: deteriorating situation and the economy, And we've been reporting throughout
Speaker 1: the show more bad news, whether it's results from Alphabet
Speaker 1: or Microsoft, or Walmart or Shopify. Talk to us about
Speaker 1: how this could have all have an impact on cybercrime. Yeah, Well,
Speaker 1: what we see is that whenever there is money to
Speaker 1: be made, there are certainly criminals that are attracted to
Speaker 1: that opportunity. So in over six hundred cases a unit
Speaker 1: forty two investigated last year, we saw payment requests as
Speaker 1: high as thirty million US dollars in ransomware cases and
Speaker 1: the average is nine thousand U S dollars, So we're
Speaker 1: almost at a million dollars as an average payment. There
Speaker 1: is a tremendous amount of money to be made, and
Speaker 1: to your point, there is still a much lower barrier
Speaker 1: to entry for the criminal side than it is for
Speaker 1: the defense side. Another interesting statistic that we identified that
Speaker 1: relates to that is it the average dwell time, meaning
Speaker 1: how long an attacker is in an environment before they
Speaker 1: go unnoticed, UH is twenty eight days. That means the
Speaker 1: longer they're in an environment, the more damage that they
Speaker 1: can cause, and that damage directly translates to the more
Speaker 1: amounts of money that they can receive on the back end.
Speaker 1: I want to ask you about China. We're preparing for
Speaker 1: how speaker Nancy Pelosi to visit Taiwan. The Chinese government
Speaker 1: not happy about this. At the same time, we're seeing
Speaker 1: Ali Baba prepare for a stock listing in Hong Kong.
Speaker 1: I'm curious if you're expecting rising US China tention to
Speaker 1: potentially lead to an increase in cybercrime as well. So
Speaker 1: I think the reality is, you know, diplomatic ties or not. Right,
Speaker 1: We've seen a tremendous amount of intellectual a property staft
Speaker 1: coming from different nation states throughout the world. China is
Speaker 1: an or is a nation state that's certainly alongside so
Speaker 1: many other countries. Has gone back and forth with the
Speaker 1: United States on that. So UH. In addition to ransomware cases,
Speaker 1: which we've spoke about, one of the largest cases we
Speaker 1: see our business email compromise, and we do see there's
Speaker 1: um an interesting amount of overlap between these cases and
Speaker 1: certainly nation state activity. I think as recent as last
Speaker 1: week we saw North Korean our team released research related
Speaker 1: to North Korean threat activity related to ransomware cases. So
Speaker 1: I don't think uh, cyber criminal activity is going away
Speaker 1: anytime soon. Whether it's at the economic crime actor or
Speaker 1: whether it's from a nation state capacity, we will continue
Speaker 1: to see more of it, all right. Wenday went More,
Speaker 1: Senior vice president, a head of palle Alto Networks Unit
Speaker 1: forty two. Wenday, great to have you, Thank you many time.
Speaker 1: It is the It is the first major effort by
Speaker 1: the US Congress to regulate big tex since the inception
Speaker 1: the Internet. Lawmakers could vote on the American Innovation and
Speaker 1: Choice Act before mid term elections. This measure would lay
Speaker 1: down ground rules for dominant companies like Alphabet, Amazon, Apple,
Speaker 1: and Meta. Earlier, I spoke with Alphabet CFO with Port
Speaker 1: and asked her about the various antitrust proposals. She said
Speaker 1: the proposals could break a wide variety of services and
Speaker 1: others we offer. That being said, we're very focused on
Speaker 1: what can be landed, and we're seeing progress in the
Speaker 1: Chips Act. We're focused on places like privacy legislation and
Speaker 1: updated protections to children. It continues to be a dynamic process.
Speaker 1: Congress has looked at this issue, right They want to
Speaker 1: opine on this, They want to try to find a
Speaker 1: pathway forward. And I think instead of doing this regulation
Speaker 1: by enforcement, we should be looking at the legislative SSS.
Speaker 1: We should be looking at the open executive order research
Speaker 1: and study that's going on right now to really think
Speaker 1: through this from a public policy perspective. Kristin Smith's there
Speaker 1: of the Blockchain Association on Bloomberg's Crypto show earlier, reacting
Speaker 1: to the latest in the coin based sec saga, Bloomber
Speaker 1: has learned that the crypto platform is facing a US
Speaker 1: investigation into its crypto listings. The SEC wants to know
Speaker 1: of the platform improperly led Americans trade digital assets that
Speaker 1: should have been listed as securities. Bloombergs Allison verse Ball
Speaker 1: joins US now from Washington, and of course are Bloomberg
Speaker 1: Crypto contributor Shinneli Bassick as well. Alison. I'll start with you,
Speaker 1: what exactly is the SEC contending here? So the SEC
Speaker 1: is trying to, you know, weigh in on on one
Speaker 1: of the biggest ISU's facing the crypto industry. It's whether
Speaker 1: these exchanges like coin base are actually listing, uh, the
Speaker 1: tokens that they're listing to our securities. And you know,
Speaker 1: if the sec determines that they are, UM, that potentially
Speaker 1: requires these these firms to register as exchanges with the regulators.
Speaker 1: So it could be a big deal. Uh. You know,
Speaker 1: it comes at a time when a lot of these
Speaker 1: exchanges are arguing that they don't offer any securities, that
Speaker 1: actually all of the tokens on their platforms our commodities. UM.
Speaker 1: So it's definitely a hot debate right now, HINALI, why
Speaker 1: is it so confusing? Why is it so hard to
Speaker 1: answer that question? Is crypto security? It's a good question,
Speaker 1: And think about how many renditions this argument has taken
Speaker 1: over the last couple of years, whether you're talking about
Speaker 1: n f T S or I c O S or
Speaker 1: crypto itself, the tokens itself. And I go back to
Speaker 1: what Brian Armstrong had said in a big tweet thread
Speaker 1: last year. Remember this is when it really started to
Speaker 1: get very contentious between the industry and the agencies. And
Speaker 1: you know what Brian Armstrong said at that time is
Speaker 1: they refused to tell us why they think it's security,
Speaker 1: and instead subpoena a bunch of records from US, we comply,
Speaker 1: demand testimony from employees. We comply, and then tell us
Speaker 1: that we y'll sue us if we launch certain products. So,
Speaker 1: you know, to Allison's point here, a lot of this
Speaker 1: is being done through enforcement rather than rulemaking itself. So
Speaker 1: until the agencies decide what's a currency, what's a commodity,
Speaker 1: and what's the security, it's going to be very difficult
Speaker 1: for the industry to to work around that. Now, Allison,
Speaker 1: is this connected to the insider trading investigation that was
Speaker 1: brought against a former coin based manager just last week.
Speaker 1: So the ongoing probe into weather coin base is offering
Speaker 1: and properly offering unregistered securities is separate, UM, but it
Speaker 1: does have some ties that you know, the insider Trading
Speaker 1: club does have some ties that could connect to coin
Speaker 1: base as well. UM. So in the SEC's complaint last week, UM,
Speaker 1: that dealt with, you know, a former coin base employee
Speaker 1: potentially leaking inflammation to his brother and a friend. At
Speaker 1: least that's the allegation. UM, the SEC did I identify
Speaker 1: nine tokens that it thought were securities. UM. And so
Speaker 1: at the time, you know, before we knew about this
Speaker 1: other probe that actually predates those allegations. At the time,
Speaker 1: I was talking to folks who said, you know, this
Speaker 1: does have effects on poin based as well, because the exchange.
Speaker 1: The exchange has said that it lists seven of the
Speaker 1: nine that were identified UM, so essentially implies, you know,
Speaker 1: if the SEC thinks these are securities and coin bases
Speaker 1: listing seven of them, UM, then it's kind of a
Speaker 1: backdoor way of saying that, you know, they do need
Speaker 1: to come in and register UM. And it works off
Speaker 1: of what SEC chair Gary Gensler has been saying for
Speaker 1: a long time now that he thinks a lot of
Speaker 1: these exchanges are offering securities and a lot of them,
Speaker 1: you know, need to come in and comply with his
Speaker 1: agency's rules. Shinnali, what are next steps here? The next
Speaker 1: steps are interesting here because if you look, for example,
Speaker 1: just all the way back at coin Bases S one,
Speaker 1: it's impo Finally, it's said that the evolving regulatory landscape
Speaker 1: would be a risk factor for investors. And look how
Speaker 1: much it has. In one the scoop that Ali had
Speaker 1: put out just today, for example, coin bases stock dropped
Speaker 1: about and with the total stock drop you've seen this year,
Speaker 1: the market cap has come down so much, Emily, think
Speaker 1: about it is less than half the size of NASDAC
Speaker 1: now and when it went public it was much much bigger.
Speaker 1: So remember exchanges in the United States, stock exchanges have
Speaker 1: what the industry likes to call or think of as
Speaker 1: quasi regulatory powers. So when you look at these big
Speaker 1: crypto exchanges, which are kind of the primary way here
Speaker 1: to regulate the industry or oversee the industry, are they
Speaker 1: going to look more like stock exchanges in the future
Speaker 1: where they have rulemaking capabilities, where they're more subject to
Speaker 1: SEC oversight. Or also how much will the agencies fight
Speaker 1: it through themselves and have the CFTC have more claim
Speaker 1: over some of these assets as commodities instead. It's an
Speaker 1: open question and it will be played out. It looks
Speaker 1: like in courts in a lot of cases, Allison, any
Speaker 1: precedent for where this could land or none at all
Speaker 1: because digital assets are so new. Uh So, I you know,
Speaker 1: I'm not a lot of precedent here in terms of
Speaker 1: whether digital assets are securities. This is actually the first
Speaker 1: time that we've really seen the SEC come out and
Speaker 1: list specific tokens that it thinks our securities, despite having
Speaker 1: said for probably over a year now that it thinks
Speaker 1: that these exchanges do have securities on them. So it's
Speaker 1: kind of a rare move for the agency. It's normally
Speaker 1: straight away from making those specific identifications, partly because it's
Speaker 1: it's probably you know, we talked to folks who say
Speaker 1: it's not really in their interest to kind of pigeon themselves.
Speaker 1: The pigeon holed themselves into. These assets are securities, these
Speaker 1: assets are commodities. By keeping it a little bit bigger,
Speaker 1: it gives them a little bit more leeway. All right,
Speaker 1: thank you so much for clarifying a very confusing situation.
Speaker 1: Flood Brigs Allison Verse, we're all along with our cryptical
Speaker 1: contribution Aali Bostic, Thank you both. Coming up. Airlines are
Speaker 1: losing more luggage than ever, so can bag trackers save
Speaker 1: you from losing your stuff forever? Spoiler? Not really? That's next.
Speaker 1: This is Bloomberg. The economy is catching up to Apple
Speaker 1: for the first time in a while. It feels like
Speaker 1: the iphonemaker is especially vulnerable to outside economic factors like
Speaker 1: rising inflation, increasing interest rates, and the fluctuating US dollar.
Speaker 1: The company this week will report third quarter earnings that
Speaker 1: many and lists anticipate will come in about flat from
Speaker 1: last year. That compares to this time a year ago,
Speaker 1: when Apple reported about thirty six year over your growth
Speaker 1: and listened to sipate. Apple to report revenue around eighty
Speaker 1: two billion dollars, with about thirty nine billion of that
Speaker 1: stemming from the iPhone, under twenty billion coming from services,
Speaker 1: about seven billion coming from the iPad, eight and a
Speaker 1: half billion coming from the Mac, and a eight point
Speaker 1: eight billion coming from popular accessories like the air pods
Speaker 1: and the Apple Watch. Well, these are certainly impressive numbers,
Speaker 1: some analysts and investors will probably be concerned about the
Speaker 1: lack of real growth. Apple already said, however, it's expecting
Speaker 1: a negative hit of about eight billion dollars to third
Speaker 1: quarter revenue due to China shutdowns related to Covid earlier
Speaker 1: this year, and of course, the ongoing chip shortage. This
Speaker 1: week's report also comes amid the company's plan to slow
Speaker 1: hiring and spending in some divisions next year as it
Speaker 1: grapples with the possibility of a recession. Morgan Stanley and
Speaker 1: Wells Fargo have also already cut their Apple stock price
Speaker 1: targets given ongoing concerns about consumer spending in the near term.
Speaker 1: I don't believe, however, that any of these are real
Speaker 1: long term issues when we consider Apple's big product plans
Speaker 1: for the end of and into which will include the
Speaker 1: company's first mixed reality headset, four new iPhone fourteen models,
Speaker 1: three new Apple Watches, new I pads, in several new macs.
Speaker 1: I'm Mark German. This is power On. You can subscribe
Speaker 1: to marks weekly power On newsletter at Bloomberg dot com. Well,
Speaker 1: airlines around the world mishandled some twenty eight million bags
Speaker 1: of luggage every year. That's just one estimate, but it
Speaker 1: could be significantly higher this year as airports struggle with
Speaker 1: high demand and fewer employees. Now folks can use trackers
Speaker 1: like air tags or tile to keep an eye on
Speaker 1: their belongings. But as our Bradstone writes, knowing where your
Speaker 1: suitcase is might not be enough to help you get
Speaker 1: it back. Our Bradstone, head of our Bloomberg Tech coverage,
Speaker 1: is here with me now. So you just took a
Speaker 1: nice trip to Europe and they didn't lose your luggage,
Speaker 1: thank goodness. But you saw this play out firsthand. That's right, Um,
Speaker 1: we're pulling out of Heathrow and a guy across the
Speaker 1: aisles waving his phone urgently at the flight attendant, going,
Speaker 1: my bags aren't on this flight, And it turned out
Speaker 1: you had put one of those twenty nine dollar Apple
Speaker 1: air tags in his suitcase and could tell that he
Speaker 1: was one of the victims of the current chaos. And
Speaker 1: I just kind of wondered, are other people doing this?
Speaker 1: And it turns out they are. But knowing where your
Speaker 1: bag is doesn't necessarily ensure that you'll be reunited with
Speaker 1: it after your flight, right I've heard so many horror
Speaker 1: stories and people saying the DOTS says it's fright behind
Speaker 1: that wall, but they can't get it back. I mean,
Speaker 1: why is this happening? Why is it so much worse
Speaker 1: this year? Yeah, I mean that is one way where
Speaker 1: the air tag can be useful. These airlines and their
Speaker 1: contractors are so overwhelmed right now, you know, knowing that
Speaker 1: your bag is behind a wall or hasn't left your
Speaker 1: point of disembarkation like that can be useful. Why are
Speaker 1: they overwhelmed? I mean, I think it's a combination of
Speaker 1: technical staff, foods and staffing shortages. Airlines, like a lot
Speaker 1: of businesses coming out of the pandemic, were not prepared
Speaker 1: for the resumption of normal travel activity. So if you're traveling,
Speaker 1: what should you do aside from not checking a bag?
Speaker 1: Do you use air tags or tile? Do you get
Speaker 1: I've gotten some pitches for smart luggage, for example. I
Speaker 1: it came out of this convinced that even though you
Speaker 1: might not be able to do anything about your missing bags,
Speaker 1: putting an air tag or a tile device in in
Speaker 1: luggage if you have to check it is a good idea.
Speaker 1: At least it will give you a piece of mind.
Speaker 1: You might not want to wait that extra hour at
Speaker 1: the airport if you know your bag's not there. But
Speaker 1: if you're going to check a bag, you're going to
Speaker 1: be really at the mercy of the airline and the
Speaker 1: airport travel light. Don't put anything important in it, really, um,
Speaker 1: I want to ask you a bit about this raft
Speaker 1: of earnings results that we've gotten kind of mixed Microsoft
Speaker 1: not good alphabet, you know, mostly slightly below estimates, advertising
Speaker 1: above estimates. I talked to Ruth port At on the phone.
Speaker 1: She used the word on certainty multiple times. She said
Speaker 1: that there are just so many different factors at play here,
Speaker 1: it's impossible to separate them out here. So the word
Speaker 1: we're using to talk about this is uncertainty. What's your takeaway? Well,
Speaker 1: first of all, compared to the blood bath of last
Speaker 1: week with Snap and Twitter, I mean, look to today
Speaker 1: has been a virtual celebrity ship. But I I agree
Speaker 1: headwinds uncertainty when it comes to buying behavior, when it
Speaker 1: comes to advertising behavior. You know, the cloud spending is
Speaker 1: a little bit below expected at Microsoft and Google. And
Speaker 1: then you have this currency question with a strong US
Speaker 1: dollar and the lower value of overseas sales that I
Speaker 1: think it's going to weigh on all the big tech companies.
Speaker 1: So obviously you've covered a few economic cycles. We're waiting
Speaker 1: Amazon later this week, Apple, Facebook as well, or I
Speaker 1: should say Meta, And there's this big question of are
Speaker 1: we in a recession or not? And how is this
Speaker 1: really going to impact big tech? What are you watching? Yeah, well,
Speaker 1: I'm the farthest thing from economic uh uh you know
Speaker 1: evangelist here, Um, it certainly seems to me we're in
Speaker 1: a recessionary period. I think, you know, for for Amazon,
Speaker 1: we're gonna look at obviously e commerce sales, cloud growth.
Speaker 1: I mean a WS isn't follow along with Azure and
Speaker 1: Google Cloud and seeing a little bit of a spending pullback.
Speaker 1: But you know, the big tech companies are very well
Speaker 1: equipped to we there this, right. I don't think that
Speaker 1: any of the Big four, Big five really are going
Speaker 1: to have that significant problem longer term. It is the
Speaker 1: company's like Snap and Twitter that seemed constantly engulfed in
Speaker 1: in this kind of terminal turmoil that are very vulnerable,
Speaker 1: which of course are more sort of experimental ad markets.
Speaker 1: But what's Who's to say that Apple, which depends on
Speaker 1: device sales significantly, isn't going to feel the impact of this.
Speaker 1: I mean, they're doing sales on their products in China, sure,
Speaker 1: and they probably will and Mark German has written a
Speaker 1: lot about that. But the strength of the Apple model,
Speaker 1: the health of the iOS ecosystem, seems so strong right now.
Speaker 1: I don't personally imagine a protracted pullback. Okay, well, we
Speaker 1: shall see. We're gonna be covering and your whole team
Speaker 1: is gonna be across earnings all week. Thank you, Brad Stone,
Speaker 1: our senior executive editor for Bloomberg Tech. And that does
Speaker 1: it for this edition of Bloomberg Technology. Tomorrow, I'm gonna
Speaker 1: speak with Mitchell Green lead Edge CEO after Spotify results,
Speaker 1: plus what he has to say about TikTok and that
Speaker 1: US continued competition, and don't forget to check out our
Speaker 1: podcast wherever you get your podcasts. I'm Emily checking in
Speaker 1: San Francisco. This is Bloomberg