WEBVTT - Apple, Amazon, Meta: Big Tech Earnings Beat

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<v Speaker 1>Good morning. I'm Brian Curtis.

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

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<v Speaker 1>Well, the US and the huties have been exchanging attacks,

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<v Speaker 1>said Baxter. Is all over that story and has more

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<v Speaker 1>from the nine to sixty newsroom in San Francisco.

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

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<v Speaker 3>surface to air missile aimed at US forces, than several

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<v Speaker 3>hours later intercepted and a ship missile fire toward the

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<v Speaker 3>Gulf of Aiden and then shot down three drones. Then

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<v Speaker 3>it says it later struck what it says was a

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<v Speaker 3>drone control station and ten one way drones in Hooty

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<v Speaker 3>controlled areas of Yemen. The waight continues for what could

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<v Speaker 3>be more involved attack. Defense Secretary Lloyd Austin here.

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<v Speaker 4>You know, I don't think the the adversaries are of

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<v Speaker 4>a one and done mindset, and so they have a

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<v Speaker 4>lot of capability. I have a lot more.

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<v Speaker 3>Former Deputy to the Secretary of Defense Mick mulroy on

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<v Speaker 3>ABC says the attack will have to be at Iran

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<v Speaker 3>infrastructure and says the delayed response could mean something very significant.

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<v Speaker 5>I am quite frankly a little confused because I think

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<v Speaker 5>the Pentagon and certainly when I was there, and I

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

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<v Speaker 5>go for the President of the United States to italiate,

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<v Speaker 5>especially when it's a near costant attack on US forces.

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<v Speaker 3>Now, Senator Lensing Graham is calling for a military strike

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<v Speaker 3>inside Iran aimed at oil.

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<v Speaker 6>The only way that will change our behavior and stop

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<v Speaker 6>killing Americans and attacking our troops and trying to bomb

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<v Speaker 6>ships in the Red Sea is for Joe Biden to

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<v Speaker 6>hit their all infrastructure and start killing their soldiers inside

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<v Speaker 6>of Iran.

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<v Speaker 3>And Bloomberg US national security reporter Nick Wadams on Balance

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<v Speaker 3>of Power says, the strategy shows that there must be

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<v Speaker 3>back channel negotiations going on otherwise it's a bit confusing,

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<v Speaker 3>but the targets are clear.

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<v Speaker 7>Iranian back proxies in Syria and Iraq. There's a real

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<v Speaker 7>reluctance to go after Iran despite pressure from Republicans within

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<v Speaker 7>Iranian territory, for fear that that would essentially ignite a

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<v Speaker 7>direct conflict for there ins. So this balancing act where

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<v Speaker 7>the administration wants to signal that the killing of the

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<v Speaker 7>three US soldiers over the weekend will not be allowed

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<v Speaker 7>to stand while also trying to avoid the very confrontation

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<v Speaker 7>and broader regional conflict that President Biden has said for

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<v Speaker 7>so many weeks he wants to avoid.

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<v Speaker 3>And he says won't be the end whatever happens now.

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<v Speaker 3>White House is calling it a new tool. President Biden's

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<v Speaker 3>new executive order will sanction those committing violence against Palestinians

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<v Speaker 3>in the West Bank. For Israeli settlers are being sanctioned today.

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<v Speaker 3>NSC Officer John Kirby says, individuals.

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<v Speaker 2>There's no plans to target with sanctions, say Israeli government

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<v Speaker 2>officials at this time.

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<v Speaker 3>Yeah, sanctions will prohibit them from accessing US financial systems.

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<v Speaker 3>Senate negotiators closing in on a deal that would address

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<v Speaker 3>the southern border and send aid to Israel and Ukraine.

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<v Speaker 3>Senate majority of Leader Chuck Schumer says a package by

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<v Speaker 3>Sunday with a vote next week. And looky here today

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<v Speaker 3>mark sixty years since this scored their first Billboard Hot

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<v Speaker 3>one hundred number one.

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<v Speaker 7>The Beatles base say to.

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<v Speaker 3>Me, everybody saying in San Francisco, I'm at Baxcer, this

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<v Speaker 3>is Bloomberg, Bryan.

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<v Speaker 1>If we were only old enough to have been there. Wow,

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<v Speaker 1>what an exciting time ed. Thank you. We'll get to

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<v Speaker 1>news again a little bit later in the hour. Now

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<v Speaker 1>it's time for the top business stories of the hour. Well.

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<v Speaker 1>As mentioned, Apple reported a deepening slump in China during

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<v Speaker 1>the holiday quarter. Sales in China dropped thirteen percent to

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<v Speaker 1>twenty point eight billion dollars, and that's even as total

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<v Speaker 1>iPhone sales were actually stronger than expected. Bloomberg's Emily Chang

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<v Speaker 1>spoke with Apple's CFO Luca Mastream about China shortly after

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<v Speaker 1>those earnings came out.

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<v Speaker 8>He said that there, you know, we say, saw a

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<v Speaker 8>record number, a record install base. They're still seeing strong

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<v Speaker 8>growth in upgraders. But again, you know, you know, this

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<v Speaker 8>is a market that folks have been very concerned about,

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<v Speaker 8>based on replacement cycles, based on you know, bands, on

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<v Speaker 8>foreign technology in the workplace. There you know, reports that

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<v Speaker 8>Apple is cutting the price of the iPhone in China.

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<v Speaker 9>So definitely a market to watch.

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<v Speaker 1>As always, Bloomberg Examinly Chang Maystreet also warned that Apple

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<v Speaker 1>sales growth may not last. It will be hard to

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

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<v Speaker 1>We mentioned that Apple stock had traded down in after hours,

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<v Speaker 1>it's a little more mixed for the suppliers. How to

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<v Speaker 1>look at four or five suppliers, Doug, and many of

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<v Speaker 1>them are trading higher, but a few, particularly in Taiwan

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<v Speaker 1>like Honhai, a little bit lower.

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<v Speaker 2>So we also heard after the belt from Meta Platforms.

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<v Speaker 2>Boy did this company shower the market with some positive

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<v Speaker 2>news to begin with. For the fourth quarter, sales were

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

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<v Speaker 2>Meta announced its first ever quarterly dividend of fifty cents

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<v Speaker 2>and the company increased its stock buyback by fifty billion billion.

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

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<v Speaker 10>Nothing matters more to Zuckerberg than his image. He was

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<v Speaker 10>deeply humiliated yesterday in the Senate. I wouldn't be at

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<v Speaker 10>all surprised if they were not sure whether they were

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<v Speaker 10>going to announce a dividend and or a big buyback

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<v Speaker 10>today until they saw how he was treated in the Senate.

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<v Speaker 10>And he was treated very badly. So they had to

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<v Speaker 10>put all their wood behind the era.

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<v Speaker 2>All the wood behind the arrow. Fifteen percent higher in

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<v Speaker 2>late US trading. That's where a Meta Platforms traded in

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<v Speaker 2>the late session. David Kirkpatrick, by the way, is the

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<v Speaker 2>editor in chief at Teconomy Media.

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<v Speaker 1>Right well, Amazon reported strong sales and also gave an

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<v Speaker 1>operating income outlook that surpassed estimates. It's a sign that

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<v Speaker 1>CEO Andy Jasse's cost cutting and focus on profitable services

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<v Speaker 1>is reshaping the company. Operating income for the period ending

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<v Speaker 1>in March will be eight billion to twelve billion knots

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<v Speaker 1>of very wide range, but the midpoint of that is

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<v Speaker 1>higher than what analysts had estimated, which is nine point

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<v Speaker 1>one two billion, and all of that is on the

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<v Speaker 1>back of sales of as much as one hundred and

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<v Speaker 1>forty three point five billion dollars. So these are big numbers.

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<v Speaker 1>Let's get some context and some understanding here. Reaction from

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<v Speaker 1>Bloomberg Intelligence is punum goil.

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<v Speaker 11>I do think the real nice numbers here were on

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<v Speaker 11>the operating income side. Right We saw a big beat there,

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

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<v Speaker 11>awus business had back operating margins and also advertising, which

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<v Speaker 11>had twenty seven percent growth. Keep in mind that that

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<v Speaker 11>segment has a fifty percent operating margin. So really, I

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<v Speaker 11>think the beat that we're going to see from Amazon

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<v Speaker 11>and operating margin will come a lot from advertising as

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<v Speaker 11>that continues to drive superior growth.

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<v Speaker 1>Bloomberg Intelligence is punum goil there the show's climb to

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<v Speaker 1>a high have one seventy four to fifty in extended trading,

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<v Speaker 1>they were up about seven to eight percent for most

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<v Speaker 1>of that time. The stock has gained five point one

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<v Speaker 1>percent this year up and till this period, after jumping

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<v Speaker 1>eighty one percent in twenty twenty three. But we all

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<v Speaker 1>remember when it was down so significantly in twenty twenty two. Well,

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

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<v Speaker 1>and she joins us here live on the program. Let's

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<v Speaker 1>go back to Apple for a moment, because China a

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

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<v Speaker 1>I want to give some context here. Apple services revenue

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<v Speaker 1>at twenty three billion dollars is higher than the total

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<v Speaker 1>iPhone sales in China. So I'm curious from your standpoint

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<v Speaker 1>whether or not that tells us more in terms of

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<v Speaker 1>the context, tells us more about the China business or

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<v Speaker 1>the services one's going up and one's going down.

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<v Speaker 9>The China business, we have to understand, is extremely important

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<v Speaker 9>for Apple the services segment, remember that includes the app

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

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<v Speaker 9>and that posted about twenty three billion dollars during the

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<v Speaker 9>holiday period. It was up about eleven percent, and you know,

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<v Speaker 9>it still came in under analysts expectations that China business,

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<v Speaker 9>though there had been some weakness already baked into the

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<v Speaker 9>estimates going in. But when we saw the numbers today,

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<v Speaker 9>they were about three billion dollars short. And that's a

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<v Speaker 9>really big miss when you think about just that scale

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<v Speaker 9>and the importance for Apple to see that kind of

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<v Speaker 9>weakness coming from one of one of its most important

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<v Speaker 9>markets was assigned for concern for investors.

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<v Speaker 2>For sure, You're absolutely right that decline was widely expected,

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<v Speaker 2>and it's tied to Chinese government agencies and state back

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

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<v Speaker 2>I mean, those instructions have been very very clear. They've

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<v Speaker 2>been instead encouraged to use the local brand. So let's

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<v Speaker 2>talk a little bit about competition from a company like Huawei.

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<v Speaker 2>Is that to be an increasing factor that Apple is

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<v Speaker 2>going to have to kind of deal with here as

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<v Speaker 2>we go forward. When when Apple considers it's business in

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<v Speaker 2>China one hundred percent.

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<v Speaker 9>If we look at some of the high points that

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<v Speaker 9>the company had when it came to the iPhone, it

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<v Speaker 9>you know, largely beat on on that front, bringing in

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<v Speaker 9>revenue about sixty nine points of it. But you know,

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<v Speaker 9>it also had the help that it had released a

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<v Speaker 9>new version of the iPhone. When you think about that

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<v Speaker 9>increased competition like you mentioned from Huawei, it's only going

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<v Speaker 9>to be able to manage some of these kind of

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<v Speaker 9>geopolitical tensions that end up showing up through some of

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<v Speaker 9>these restrictions. So much so at some point you're going

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<v Speaker 9>to see perhaps the company make more statements about how

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<v Speaker 9>it's not just diversifying, but maybe putting more capital and

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<v Speaker 9>focus on other lines of business to smooth out some

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<v Speaker 9>of that rockiness coming from China. And on that note,

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<v Speaker 9>you know, so let's take a look at one of

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<v Speaker 9>the areas that it is investing in quite heavily. This

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<v Speaker 9>is the eve of the Vision Pro headset release. That

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<v Speaker 9>is one of the areas that's new to Apple. We

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<v Speaker 9>think about the company as like this major innovator, and

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

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<v Speaker 9>really excited about that. But when it comes to your point,

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

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<v Speaker 9>It's entering this new market and we'll see what comes

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<v Speaker 9>of that. Augmented reality is a really expensive venture but

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<v Speaker 9>also one of the most innovative fronts we have right

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<v Speaker 9>now in tech.

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<v Speaker 1>Well, we have to remember that the iPhone actually passed

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<v Speaker 1>those competitors in China to become the number one smartphone

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<v Speaker 1>seller in China last year. What's happening in China is

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<v Speaker 1>a little bit outside of Apple's control in some sense.

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<v Speaker 1>The economy is stumbled. Policy is very uneven, and again,

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<v Speaker 1>as Doug mentioned, even government officials are telling people don't

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<v Speaker 1>bring your iPhone to work. So that's one that's going

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<v Speaker 1>to play out. It'll be very interesting. Let's switch to

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<v Speaker 1>Amazon a little bit and talk about what they achieved.

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<v Speaker 1>You know, you've got cost cutting at a time when

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<v Speaker 1>they are jacking up sales. It's good for the for

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<v Speaker 1>the stock price, isn't it?

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<v Speaker 9>Totally? And it was one of the one of the

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<v Speaker 9>more bright spots in tech, especially when you had a

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<v Speaker 9>competitor in the cloud space and in the advertising space.

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<v Speaker 9>Alphabet earlier this week kind of disappointing. Amazon really gained

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<v Speaker 9>on both fronts, and you saw them really talk about

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<v Speaker 9>that cost the cost cutting benefits that it's been able

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<v Speaker 9>to reap over the last couple quarters. It's been a

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<v Speaker 9>pretty bloody season really the past year for tech. That

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<v Speaker 9>operating income came in or it's expected to come in

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<v Speaker 9>at about eight billion and twelve billion for the coming quarter.

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<v Speaker 9>That was just, you know, right above what analysts are expecting.

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<v Speaker 9>So that outlook, you know, also country to that bulled

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<v Speaker 9>sentiment that we saw in shares after earnings.

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<v Speaker 2>Yeah, well, speaking of bullying sentiment, I think we have

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<v Speaker 2>to talk a little bit about Meta platforms, and I

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<v Speaker 2>think David Kirkpatrick, we just played a clip of something

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<v Speaker 2>that David had to say a moment ago talking about

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<v Speaker 2>the reaction yesterday as a result of mister Zuckerberg's testimony

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<v Speaker 2>before the Senate committee today, we learned that the company

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<v Speaker 2>has increased at stock a buyback planed by fifty billion

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<v Speaker 2>dollars and at the same time announced its first dividend

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<v Speaker 2>of fifty cents a share. And what David was saying

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<v Speaker 2>is going into maybe the testimony yesterday, you could imagine

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<v Speaker 2>Meta doing one or the other but not both, And

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<v Speaker 2>he asked the question whether or not it was possible

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<v Speaker 2>to imagine this kind of largess that Meta bestowed on

0:12:49.960 --> 0:12:52.600
<v Speaker 2>the market today having to do with the challenges that

0:12:52.679 --> 0:12:57.160
<v Speaker 2>mister Zuckerberg faced in that testimony yesterday. You think that's

0:12:57.200 --> 0:12:57.959
<v Speaker 2>a fair statement.

0:12:59.559 --> 0:13:02.360
<v Speaker 9>You have to wonder if it was a diversion act

0:13:02.360 --> 0:13:05.880
<v Speaker 9>of some kind, because it was pretty painful to watch

0:13:05.920 --> 0:13:10.080
<v Speaker 9>that hearing yesterday, and it was a long time coming.

0:13:10.120 --> 0:13:14.000
<v Speaker 9>You've seen so much great reporting from Bloomberg, included about

0:13:14.040 --> 0:13:18.199
<v Speaker 9>just the negative effects that the social media platform can

0:13:18.280 --> 0:13:23.000
<v Speaker 9>have on young people, and the other hand, you know,

0:13:23.360 --> 0:13:26.880
<v Speaker 9>we're focusing on the revenue that it generates. So you

0:13:26.960 --> 0:13:30.320
<v Speaker 9>got to wonder was he taking a victory lap, But

0:13:30.640 --> 0:13:33.080
<v Speaker 9>just looking at the numbers, he certainly could if we're

0:13:33.120 --> 0:13:38.000
<v Speaker 9>just looking at the numbers alone. Not only were profits

0:13:38.080 --> 0:13:42.240
<v Speaker 9>ahead of estimates, revenue came in head of estimates. And

0:13:42.280 --> 0:13:45.160
<v Speaker 9>it's interesting how this was kind of a different type

0:13:45.160 --> 0:13:49.080
<v Speaker 9>of China story. CFO Susan Lee said that that strong

0:13:49.200 --> 0:13:52.000
<v Speaker 9>increase in revenue in the fourth quarter was largely due

0:13:52.480 --> 0:13:57.480
<v Speaker 9>by high spending in China from advertisers in that region,

0:13:58.040 --> 0:14:00.840
<v Speaker 9>as well as AI recommended video CUN so you're kind

0:14:00.880 --> 0:14:02.920
<v Speaker 9>of seeing a different story than we saw on Apple.

0:14:03.559 --> 0:14:05.840
<v Speaker 1>It does highlight an interesting point though, that the big

0:14:05.840 --> 0:14:09.559
<v Speaker 1>megacap tech companies are starting to behave more like the

0:14:09.600 --> 0:14:13.200
<v Speaker 1>old line companies in terms of dividends and buybacks. Is

0:14:13.200 --> 0:14:15.280
<v Speaker 1>that a trend that we would expect to continue?

0:14:16.320 --> 0:14:19.640
<v Speaker 9>You know? I think so, because these companies are reaching

0:14:19.680 --> 0:14:24.160
<v Speaker 9>a point of maturity, and when that happens, you know,

0:14:24.600 --> 0:14:28.120
<v Speaker 9>it has only so many areas where it can spend

0:14:28.120 --> 0:14:33.000
<v Speaker 9>its money. It starts rewarding investors with these dividends. Apples

0:14:33.040 --> 0:14:36.920
<v Speaker 9>an interesting ones. You know, they've been doling out dividends

0:14:36.960 --> 0:14:40.720
<v Speaker 9>for a while, and some of these other tech companies

0:14:40.720 --> 0:14:42.440
<v Speaker 9>have kind of reached a similar stage as well.

0:14:44.560 --> 0:14:47.400
<v Speaker 1>This is Bloomberg Daybreak Asia, your morning brief on the

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