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Speaker 1: Good morning. I'm Brian Curtis.

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Speaker 2: And I'm Doug Prisner. Here are the stories we're following today.

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Speaker 1: Well, the US and the huties have been exchanging attacks,

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Speaker 1: said Baxter. Is all over that story and has more

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Speaker 1: from the nine to sixty newsroom in San Francisco.

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Speaker 3: Yeah, that's right, Brian. US Command says it intercepted a

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Speaker 3: surface to air missile aimed at US forces, than several

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Speaker 3: hours later intercepted and a ship missile fire toward the

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Speaker 3: Gulf of Aiden and then shot down three drones. Then

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Speaker 3: it says it later struck what it says was a

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Speaker 3: drone control station and ten one way drones in Hooty

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Speaker 3: controlled areas of Yemen. The waight continues for what could

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Speaker 3: be more involved attack. Defense Secretary Lloyd Austin here.

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Speaker 4: You know, I don't think the the adversaries are of

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Speaker 4: a one and done mindset, and so they have a

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Speaker 4: lot of capability. I have a lot more.

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Speaker 3: Former Deputy to the Secretary of Defense Mick mulroy on

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Speaker 3: ABC says the attack will have to be at Iran

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Speaker 3: infrastructure and says the delayed response could mean something very significant.

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Speaker 5: I am quite frankly a little confused because I think

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Speaker 5: the Pentagon and certainly when I was there, and I

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Speaker 5: don't think it's changed much, always has targets ready to

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Speaker 5: go for the President of the United States to italiate,

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Speaker 5: especially when it's a near costant attack on US forces.

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Speaker 3: Now, Senator Lensing Graham is calling for a military strike

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Speaker 3: inside Iran aimed at oil.

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Speaker 6: The only way that will change our behavior and stop

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Speaker 6: killing Americans and attacking our troops and trying to bomb

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Speaker 6: ships in the Red Sea is for Joe Biden to

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Speaker 6: hit their all infrastructure and start killing their soldiers inside

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Speaker 6: of Iran.

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Speaker 3: And Bloomberg US national security reporter Nick Wadams on Balance

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Speaker 3: of Power says, the strategy shows that there must be

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Speaker 3: back channel negotiations going on otherwise it's a bit confusing,

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Speaker 3: but the targets are clear.

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Speaker 7: Iranian back proxies in Syria and Iraq. There's a real

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Speaker 7: reluctance to go after Iran despite pressure from Republicans within

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Speaker 7: Iranian territory, for fear that that would essentially ignite a

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Speaker 7: direct conflict for there ins. So this balancing act where

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Speaker 7: the administration wants to signal that the killing of the

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Speaker 7: three US soldiers over the weekend will not be allowed

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Speaker 7: to stand while also trying to avoid the very confrontation

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Speaker 7: and broader regional conflict that President Biden has said for

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Speaker 7: so many weeks he wants to avoid.

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Speaker 3: And he says won't be the end whatever happens now.

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Speaker 3: White House is calling it a new tool. President Biden's

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Speaker 3: new executive order will sanction those committing violence against Palestinians

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Speaker 3: in the West Bank. For Israeli settlers are being sanctioned today.

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Speaker 3: NSC Officer John Kirby says, individuals.

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Speaker 2: There's no plans to target with sanctions, say Israeli government

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Speaker 2: officials at this time.

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Speaker 3: Yeah, sanctions will prohibit them from accessing US financial systems.

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Speaker 3: Senate negotiators closing in on a deal that would address

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Speaker 3: the southern border and send aid to Israel and Ukraine.

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Speaker 3: Senate majority of Leader Chuck Schumer says a package by

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Speaker 3: Sunday with a vote next week. And looky here today

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Speaker 3: mark sixty years since this scored their first Billboard Hot

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Speaker 3: one hundred number one.

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Speaker 7: The Beatles base say to.

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Speaker 3: Me, everybody saying in San Francisco, I'm at Baxcer, this

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Speaker 3: is Bloomberg, Bryan.

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Speaker 1: If we were only old enough to have been there. Wow,

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Speaker 1: what an exciting time ed. Thank you. We'll get to

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Speaker 1: news again a little bit later in the hour. Now

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Speaker 1: it's time for the top business stories of the hour. Well.

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Speaker 1: As mentioned, Apple reported a deepening slump in China during

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Speaker 1: the holiday quarter. Sales in China dropped thirteen percent to

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Speaker 1: twenty point eight billion dollars, and that's even as total

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Speaker 1: iPhone sales were actually stronger than expected. Bloomberg's Emily Chang

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Speaker 1: spoke with Apple's CFO Luca Mastream about China shortly after

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Speaker 1: those earnings came out.

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Speaker 8: He said that there, you know, we say, saw a

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Speaker 8: record number, a record install base. They're still seeing strong

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Speaker 8: growth in upgraders. But again, you know, you know, this

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Speaker 8: is a market that folks have been very concerned about,

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Speaker 8: based on replacement cycles, based on you know, bands, on

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Speaker 8: foreign technology in the workplace. There you know, reports that

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Speaker 8: Apple is cutting the price of the iPhone in China.

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Speaker 9: So definitely a market to watch.

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Speaker 1: As always, Bloomberg Examinly Chang Maystreet also warned that Apple

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Speaker 1: sales growth may not last. It will be hard to

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Speaker 1: compare Apple's current quarter with the period from a year earlier.

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Speaker 1: We mentioned that Apple stock had traded down in after hours,

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Speaker 1: it's a little more mixed for the suppliers. How to

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Speaker 1: look at four or five suppliers, Doug, and many of

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Speaker 1: them are trading higher, but a few, particularly in Taiwan

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Speaker 1: like Honhai, a little bit lower.

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Speaker 2: So we also heard after the belt from Meta Platforms.

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Speaker 2: Boy did this company shower the market with some positive

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Speaker 2: news to begin with. For the fourth quarter, sales were

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Speaker 2: up twenty five percent, profits tripled. Doesn't stop there, because

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Speaker 2: Meta announced its first ever quarterly dividend of fifty cents

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Speaker 2: and the company increased its stock buyback by fifty billion billion.

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Speaker 2: Here's David Kirkpatrick. He's the editor in chief at Teconomy Media.

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Speaker 10: Nothing matters more to Zuckerberg than his image. He was

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Speaker 10: deeply humiliated yesterday in the Senate. I wouldn't be at

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Speaker 10: all surprised if they were not sure whether they were

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Speaker 10: going to announce a dividend and or a big buyback

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Speaker 10: today until they saw how he was treated in the Senate.

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Speaker 10: And he was treated very badly. So they had to

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Speaker 10: put all their wood behind the era.

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Speaker 2: All the wood behind the arrow. Fifteen percent higher in

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Speaker 2: late US trading. That's where a Meta Platforms traded in

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Speaker 2: the late session. David Kirkpatrick, by the way, is the

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Speaker 2: editor in chief at Teconomy Media.

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Speaker 1: Right well, Amazon reported strong sales and also gave an

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Speaker 1: operating income outlook that surpassed estimates. It's a sign that

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Speaker 1: CEO Andy Jasse's cost cutting and focus on profitable services

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Speaker 1: is reshaping the company. Operating income for the period ending

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Speaker 1: in March will be eight billion to twelve billion knots

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Speaker 1: of very wide range, but the midpoint of that is

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Speaker 1: higher than what analysts had estimated, which is nine point

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Speaker 1: one two billion, and all of that is on the

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Speaker 1: back of sales of as much as one hundred and

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Speaker 1: forty three point five billion dollars. So these are big numbers.

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Speaker 1: Let's get some context and some understanding here. Reaction from

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Speaker 1: Bloomberg Intelligence is punum goil.

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Speaker 11: I do think the real nice numbers here were on

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Speaker 11: the operating income side. Right We saw a big beat there,

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Speaker 11: and that's I think thanks to two things. One, the

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Speaker 11: awus business had back operating margins and also advertising, which

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Speaker 11: had twenty seven percent growth. Keep in mind that that

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Speaker 11: segment has a fifty percent operating margin. So really, I

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Speaker 11: think the beat that we're going to see from Amazon

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Speaker 11: and operating margin will come a lot from advertising as

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Speaker 11: that continues to drive superior growth.

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Speaker 1: Bloomberg Intelligence is punum goil there the show's climb to

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Speaker 1: a high have one seventy four to fifty in extended trading,

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Speaker 1: they were up about seven to eight percent for most

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Speaker 1: of that time. The stock has gained five point one

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Speaker 1: percent this year up and till this period, after jumping

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Speaker 1: eighty one percent in twenty twenty three. But we all

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Speaker 1: remember when it was down so significantly in twenty twenty two. Well,

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Speaker 1: let's get to our guest now, Bloomberg Technology reporter Jackie Devalos,

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Speaker 1: and she joins us here live on the program. Let's

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Speaker 1: go back to Apple for a moment, because China a

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Speaker 1: big focus, and that's what we're all about Bloomberg Daybreak Asia.

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Speaker 1: I want to give some context here. Apple services revenue

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Speaker 1: at twenty three billion dollars is higher than the total

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Speaker 1: iPhone sales in China. So I'm curious from your standpoint

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Speaker 1: whether or not that tells us more in terms of

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Speaker 1: the context, tells us more about the China business or

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Speaker 1: the services one's going up and one's going down.

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Speaker 9: The China business, we have to understand, is extremely important

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Speaker 9: for Apple the services segment, remember that includes the app

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Speaker 9: store and streaming platforms. That's really high revenue dollars coming in,

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Speaker 9: and that posted about twenty three billion dollars during the

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Speaker 9: holiday period. It was up about eleven percent, and you know,

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Speaker 9: it still came in under analysts expectations that China business,

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Speaker 9: though there had been some weakness already baked into the

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Speaker 9: estimates going in. But when we saw the numbers today,

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Speaker 9: they were about three billion dollars short. And that's a

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Speaker 9: really big miss when you think about just that scale

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Speaker 9: and the importance for Apple to see that kind of

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Speaker 9: weakness coming from one of one of its most important

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Speaker 9: markets was assigned for concern for investors.

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Speaker 2: For sure, You're absolutely right that decline was widely expected,

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Speaker 2: and it's tied to Chinese government agencies and state back

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Speaker 2: firms telling employees, hey, don't bring an iPhone to work.

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Speaker 2: I mean, those instructions have been very very clear. They've

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Speaker 2: been instead encouraged to use the local brand. So let's

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Speaker 2: talk a little bit about competition from a company like Huawei.

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Speaker 2: Is that to be an increasing factor that Apple is

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Speaker 2: going to have to kind of deal with here as

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Speaker 2: we go forward. When when Apple considers it's business in

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Speaker 2: China one hundred percent.

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Speaker 9: If we look at some of the high points that

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Speaker 9: the company had when it came to the iPhone, it

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Speaker 9: you know, largely beat on on that front, bringing in

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Speaker 9: revenue about sixty nine points of it. But you know,

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Speaker 9: it also had the help that it had released a

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Speaker 9: new version of the iPhone. When you think about that

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Speaker 9: increased competition like you mentioned from Huawei, it's only going

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Speaker 9: to be able to manage some of these kind of

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Speaker 9: geopolitical tensions that end up showing up through some of

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Speaker 9: these restrictions. So much so at some point you're going

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Speaker 9: to see perhaps the company make more statements about how

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Speaker 9: it's not just diversifying, but maybe putting more capital and

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Speaker 9: focus on other lines of business to smooth out some

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Speaker 9: of that rockiness coming from China. And on that note,

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Speaker 9: you know, so let's take a look at one of

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Speaker 9: the areas that it is investing in quite heavily. This

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Speaker 9: is the eve of the Vision Pro headset release. That

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Speaker 9: is one of the areas that's new to Apple. We

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Speaker 9: think about the company as like this major innovator, and

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Speaker 9: on this front, it's sort of a newbie. We're all

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Speaker 9: really excited about that. But when it comes to your point,

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Speaker 9: like you know, competition's going to come from a few angles.

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Speaker 9: It's entering this new market and we'll see what comes

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Speaker 9: of that. Augmented reality is a really expensive venture but

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Speaker 9: also one of the most innovative fronts we have right

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Speaker 9: now in tech.

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Speaker 1: Well, we have to remember that the iPhone actually passed

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Speaker 1: those competitors in China to become the number one smartphone

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Speaker 1: seller in China last year. What's happening in China is

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Speaker 1: a little bit outside of Apple's control in some sense.

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Speaker 1: The economy is stumbled. Policy is very uneven, and again,

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Speaker 1: as Doug mentioned, even government officials are telling people don't

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Speaker 1: bring your iPhone to work. So that's one that's going

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Speaker 1: to play out. It'll be very interesting. Let's switch to

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Speaker 1: Amazon a little bit and talk about what they achieved.

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Speaker 1: You know, you've got cost cutting at a time when

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Speaker 1: they are jacking up sales. It's good for the for

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Speaker 1: the stock price, isn't it?

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Speaker 9: Totally? And it was one of the one of the

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Speaker 9: more bright spots in tech, especially when you had a

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Speaker 9: competitor in the cloud space and in the advertising space.

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Speaker 9: Alphabet earlier this week kind of disappointing. Amazon really gained

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Speaker 9: on both fronts, and you saw them really talk about

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Speaker 9: that cost the cost cutting benefits that it's been able

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Speaker 9: to reap over the last couple quarters. It's been a

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Speaker 9: pretty bloody season really the past year for tech. That

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Speaker 9: operating income came in or it's expected to come in

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Speaker 9: at about eight billion and twelve billion for the coming quarter.

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Speaker 9: That was just, you know, right above what analysts are expecting.

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Speaker 9: So that outlook, you know, also country to that bulled

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Speaker 9: sentiment that we saw in shares after earnings.

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Speaker 2: Yeah, well, speaking of bullying sentiment, I think we have

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Speaker 2: to talk a little bit about Meta platforms, and I

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Speaker 2: think David Kirkpatrick, we just played a clip of something

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Speaker 2: that David had to say a moment ago talking about

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Speaker 2: the reaction yesterday as a result of mister Zuckerberg's testimony

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Speaker 2: before the Senate committee today, we learned that the company

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Speaker 2: has increased at stock a buyback planed by fifty billion

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Speaker 2: dollars and at the same time announced its first dividend

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Speaker 2: of fifty cents a share. And what David was saying

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Speaker 2: is going into maybe the testimony yesterday, you could imagine

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Speaker 2: Meta doing one or the other but not both, And

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Speaker 2: he asked the question whether or not it was possible

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Speaker 2: to imagine this kind of largess that Meta bestowed on

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Speaker 2: the market today having to do with the challenges that

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Speaker 2: mister Zuckerberg faced in that testimony yesterday. You think that's

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Speaker 2: a fair statement.

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Speaker 9: You have to wonder if it was a diversion act

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Speaker 9: of some kind, because it was pretty painful to watch

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Speaker 9: that hearing yesterday, and it was a long time coming.

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Speaker 9: You've seen so much great reporting from Bloomberg, included about

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Speaker 9: just the negative effects that the social media platform can

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Speaker 9: have on young people, and the other hand, you know,

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Speaker 9: we're focusing on the revenue that it generates. So you

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Speaker 9: got to wonder was he taking a victory lap, But

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Speaker 9: just looking at the numbers, he certainly could if we're

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Speaker 9: just looking at the numbers alone. Not only were profits

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Speaker 9: ahead of estimates, revenue came in head of estimates. And

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Speaker 9: it's interesting how this was kind of a different type

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Speaker 9: of China story. CFO Susan Lee said that that strong

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Speaker 9: increase in revenue in the fourth quarter was largely due

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Speaker 9: by high spending in China from advertisers in that region,

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Speaker 9: as well as AI recommended video CUN so you're kind

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Speaker 9: of seeing a different story than we saw on Apple.

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Speaker 1: It does highlight an interesting point though, that the big

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Speaker 1: megacap tech companies are starting to behave more like the

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Speaker 1: old line companies in terms of dividends and buybacks. Is

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Speaker 1: that a trend that we would expect to continue?

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Speaker 9: You know? I think so, because these companies are reaching

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Speaker 9: a point of maturity, and when that happens, you know,

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Speaker 9: it has only so many areas where it can spend

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Speaker 9: its money. It starts rewarding investors with these dividends. Apples

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Speaker 9: an interesting ones. You know, they've been doling out dividends

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Speaker 9: for a while, and some of these other tech companies

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Speaker 9: have kind of reached a similar stage as well.

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