Huawei Unveils Its Android Alternative Operating System; Chipmaker Broadcom Buying Symantec's Enterprise Software Business For Over $10 Billion; Uber Disappointing.
JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR, FIRST MOVE: Live from the New York Stock Exchange. I'm Julia Chatterley. This is FIRST MOVE, and here's your need to know. Hoping for harmony: Huawei unveils its Android alternative operating system. Broadening out: Chipmaker Broadcom buying Symantec's enterprise software business for over $10 billion. And Uber disappointing. The ride hailing app posting an XL loss. It's fortunately Friday. Let's make a move. Welcome once again to FIRST MOVE, almost forgot it was Friday. I'm not quite sure how, but they say though fortune favors the brave, and I can tell you bravery has been needed with the market volatility this week. Right now, what we're looking at for Wall Street majors here. The stocks down premarket once again following what was in fact the best day for stocks in two months on Thursday. Volatility is the name of the game. I think we chalked that up to firmer us bond yields over the past couple of days. The Dow and the S&P gaining one and a half percent yesterday. The NASDAQ rising more than two percent were actually positive. As we stand right now for the week following, of course, Monday's three percent tumble on China devaluation fears. That feels like weeks ago right now. But we did see China's Central Bank guiding yuan lower for the seventh straight session. Key: The pace of the decline here is slow and steady. But I think the direction is pretty clear and that is weaker. What about what we're seeing over in Europe right now? Well, I can tell you it is weakness there, too. Italian stocks down over two percent. Bond yields have jumped amid strong signals from the coalition government there, but we could be about to see a collapse. Over in the U.K., too, the economy contracting in the second quarter. More details on that coming up very shortly. Now, from a negative surprise on that to a positive one, Japanese growth data coming in better than expected for the second quarter that then triggered a pop higher in the Japanese yen and as a result, fueling more speculation that the Bank of Japan might intervene to try and weaken the currency. Well, I can tell you, too, two can play at that game. President Trump, of course, tweeting yesterday that he liked to see a weaker U.S. dollar at this moment. His trade seem to be having more impact on weakening everyone else's currencies. Speaking of trade wars. Let's get to the drivers. Huawei launching its new operating system called Harmony OS. This comes just as the White House says it's going to crack down on government contracts of Huawei and some of the others. Matt Rivers joins me on this. Aptly named, Matt, if only they were hard money, quite frankly, but Huawei saying, "Look, we've got an alternative if we lose access to Google's Android here."</s>MATT RIVERS, CNN INTERNATIONAL CORRESPONDENT: Yes, and you know this is according to the Consumer Business CEO, Richard Yu you who made this presentation earlier today, you know, this operating system has been in development for the last two years, Julia, but it's really become a lot more important recently because of this trade war -- I'll get into that in a second. But just to talk about the operating system for a second here. It's not going to show up on Huawei smartphones right away. They say they're going to do that over the next three to five years. Really, you're going to start seeing it more on what they're calling their smart screens, which will debut later this year. You might see it on smart watches that Huawei makes and even in in-vehicle systems. So this operating system is going to be rolled out slowly over time it looks like, but this all comes back to this trade war because remember, it was back in May that the Trump administration placed Huawei on an entity list which basically forbade U.S. companies from selling their technology to Huawei. Huawei needs key U.S. technology to operate, including Google's Android operating system, which is what Huawei's smartphones run on basically. Now, Huawei can only use the open source or the public version of Android and can't use the Google apps like Google Mail, like Google Maps, and so that was a big deal for Huawei. So, this operating system is basically a hedge, Julia against, you know, Huawei needing U.S. products in order to make its own products competitive.</s>CHATTERLEY: And there's so much or so little clarity around what the relationship is going to be going forward, particularly with companies that supply Huawei. But what we heard yesterday from the White House was, as far as Federal contracts are concerned, they're going to tighten the grip here.</s>RIVERS: Yes, and not only that, but Bloomberg has been reporting this week that the White House was considering at one point which we had no public knowledge that they were going to loosen some of those restrictions on private U.S. companies like Google providing technology to Huawei.</s>RIVERS: Well, Bloomberg is reporting that the White House is going to delay restarting some of those relationships. And so Huawei is -- you know, this puts a big question mark over Huawei's future, and I think this just goes to show you that there's no short term deal in place for Huawei, no immediate relief as this trade war drags on with no end in sight, Julia. You know, companies that are caught in the middle, not only Huawei, but you know, companies like Apple or Intel, you know, these are all examples of private companies that are going to continue to get hurt from this trade war.</s>CHATTERLEY: Absolutely. And an operating system takes time, it takes years to develop. So I'm a hedge, but what kind of quality? Matt Rivers, great to have you with us and on a Friday night, too. We are very appreciative.</s>RIVERS: Happy to be here.</s>CHATTERLEY: Let's talk about Broadcom now, because Broadcom is looking to buy Symantec's Enterprise Security unit for $10.7 billion in cash. Paul La Monica joins us now. A bit of a head scratcher for me this one, Paul, but talk us through the details. And then we'll work out whether this is a good idea or not. Very different from their core business, of course, which is chip maker -- chip making.</s>PAUL LA MONICA, CNN BUSINESS REPORTER: Yes, exactly. Julia, I think it's a bit of a head scratcher because as you point out, Broadcom is mainly known for being a chip company, but it has been making efforts to diversify and try and find higher margin businesses like software. So by buying the Symantec corporate cybersecurity business, the hope is that this can be a deal that will give them a new revenue stream and, you know, possibly some more profits as well at a time where, you know, there are concerns about what's going on in the chip market, particularly because of U.S.-China trade tension.</s>CHATTERLEY: Yes, it is quite fascinating. To your point, if you can't see growth organically, then you can buy in, except the revenues of this company, I was just flicking through some of the numbers earlier and they're actually shrinking. So, it's how much can you strip out of this business in terms of costs, perhaps to generate more growth here, which for me is an interesting one. The challenge, of course, for Broadcom was that they couldn't buy the whole thing. They tried to buy Qualcomm and they were refused access. Is this going to get through the regulators? Or do they not have any problems since they shifted their HQ to California?</s>LA MONICA: Yes, I think the move to San Jose obviously helps on that front. There shouldn't be any major issues with this deal from the standpoint of President Trump in a CFIUS review. But it's still possible from an antitrust standpoint that there will be some scrutiny of the deal in the U.S. and Europe. It probably is going to go through though. And you're right, though, Julia. Obviously, this is still not exactly a high growth business, even though the margins are higher for Broadcom. So I think that the company is going to try and cut costs, but you can cut costs too aggressively, you know, a different business, obviously, but Kraft Heinz is a perfect example of what happens when you just slash expenses, but don't actually invest in growth.</s>CHATTERLEY: Couldn't agree more. Paul La Monica, thank you so much for that. All right, on to our next driver now and Uber shares going into reverse premarket. The company reporting a record $5.2 billion loss late Thursday. The stock down some eight percent premarket. Clare Sebastian joins me now. Clare, these results to me felt like a car exhaust with a hole in it. They were simply really noisy. Talk us through the details here, because a lot of the losses here tie back to the IPO and expenses related to that.</s>CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Yes, Julia, absolutely. $3.9 billion of the loss. It was more than $5 billion in three months. That was mostly due to cost related to the IPO, that's true, but there's no hiding behind that. Because even if you strip that out, they look $1.3 billion in the last quarter, that's more than 50 percent increase on the same period last year. And you know, I think Wall Street might be more willing to overlook that if we were seeing the kind of growth rates when it comes to revenue that we've become used to seeing, but revenue was only up 14 percent and compare that to Uber's biggest competitor in the U.S., Lyft that reported yesterday 72 percent increase in revenue. So this is a pretty, you know, kind of ugly report on the surface. But some perspective here. If you look at gross bookings, they were up 31 percent. That says that there's still demand for this. Uber Eats was up 72 percent in terms of revenue. That's starting to contribute a little more to the top line revenue growth. In terms of Uber and in terms of what analysts are saying this morning, Julia, it's not a complete disaster. We can show you some of the price targets today. Most of them either unchanged or even slightly raised. People are starting to look at the sense that the competition with it in terms of price wars with Lyft is easing in the U.S. And then Goldman Sachs said that it was interesting. They said today, "We continue to believe the risk reward in owning the leader in this space is favorable despite the regulatory concerns, despite the competition." This is still the biggest player out there and they are very diverse business today, Julia.</s>SEBASTIAN: So, I think that's why we see some kind of long term positivity despite this disappointing number today.</s>CHATTERLEY: Yes, you make a great point as well. And we talked about this yesterday, even if the price competition and the price wars with Lyft easing, Uber has got far greater businesses around the world, not just the United States. So other things to tackle there perhaps. What about a path to profitability here? Because even Dara Khosrowshahi talked about this in a meme that's going around saying, "Are they ever going to be profitable here?"</s>SEBASTIAN: Yes, he got a meme on the call for that. That was really interesting. And there was another interesting comment from him, Julia. He said, "The balance between the top and bottom line is more of an art rather than a science." He was a little less definitive when it comes to when they expect to break even or when they expect to be profitable compared to the Lyft, which said, "Look, we think 2018 was our peak loss year." They are now probably at least a year ahead of Uber in that regard. Dara Khosrowshahi, he said he expects 2019 to be the peak loss year, but he was, as I say, less definitive. And I think, you know, comparing it with Lyft, it isn't always useful, because as we've said, Uber is a much more diverse business. They are in everything -- from Eats, which is incredibly fast growing, incredibly competitive to everything from new mobility to freight to even flying taxis. So they are definitely -- they made this very clear on the call -- still in an investment mode. And I think they are hoping that Wall Street stays with them through this.</s>CHATTERLEY: Yes, this is a transportation app. It's not a ride hailing app. Clare Sebastian, thank you so much for that. All right to the U.K. now where the U.K. economy contracted in the second quarter for the worst quarterly performance I believe since 2012. Isa Soares joins us now on this story. Isa, it feels like some of the stockpiling that we saw in the first quarter leaking away and some real uncertainty here yet again over Brexit risks. Talk us through the details here. What did we see?</s>ISA SOARES, CNN INTERNATIONAL CORRESPONDENT: Very much in fact, Julia, one economist telling CNN this will be a rude awakening for Boris Johnson and most likely leave Boris Johnson and his government really your knife edge when we're talking about the third quarter because what we saw, you are seeing there on your screen, the U.K. economy contracting 0.2 percent in the second quarter, the biggest in seven years in terms of contraction. Now, economists as well as the Bank of England, Julia, are expecting it to flatline, so this is quite a surprise here, but we're talking about U.K. production shrinking by 1.4 percent, manufacturing -- get this -- down by 2.3 percent. This is down to a couple of things. One, as you say, a lot of stockpiling that we saw in the first quarter. That's beginning to unwind. This is the stockpiling preparation for Brexit, this do or die Brexit the government was saying, but also factory shutdowns. They've been moved earlier in April rather the end of summer. But the reality is, Clare, it doesn't matter whichever you read these numbers, Julia. This is uncertainty, the lack of clarity, the nervousness within the market of a no deal Brexit; that is starting to bite and starting to be felt. You are seeing there the pound; actually, Sterling fell to a two-year low against the dollar. It actually went down to $1.21. Yet Boris Johnson, Julia is continuing to push through his do or die pledge. And in fact, we heard today from Savid Javid, the U.K. Chancellor who said, "Look, we're not expecting recession," and painting rather a really good and positive picture when it comes to the U.K. economy. But what these numbers show, it is pretty dire, says the CBI -- Julia.</s>CHATTERLEY: Yes, just because you're not expecting it doesn't mean you don't get it. Talk to me about the video that Boris Johnson popped on social media because I retweeted this this morning. He was talking about game, he was talking about relaxing some of the immigration laws to encourage scientists to come in and help develop drugs and innovation in the U.K. It sound like a brilliant idea. Do we have any detail on exactly how and when they are going to do this?</s>SOARES: No, very little on detail as it's been something we've seen from this administration. But I can say, Boris Johnson as you can see there, "Tonight, I announced live on Facebook we're changing immigration rules to make it easy for scientists to live and work in the U.K." Now he took -- he did a Facebook Live which we haven't seen him do and he wants to point space, fast track immigration route to try and attract what he says the very best minds from around the world specifically when it comes to science, engineering as well as technology. No word as of when that will start, when will it take place, what will shift in terms of numbers? But he -- they want to abolish the 2,000 a year cap on the number one -- on the tier one exceptional visa talents. And that, I have to say has been very well received by many people here and say this is a great idea. We need to build on the science, on the engineering and really boost the economy with this talent. So very well received. The tactic though coming to Facebook or doing a Facebook Live is something that we haven't seen before from Boris Johnson, but it's something that has been very well received here -- Julia.</s>CHATTERLEY: Yes, welcome to the 21st Century. Isa Soares, thank you so much for that. All right, let me bring you up to speed now with some of the other stories that we're following around the world. Hong Kong protesters have begun what's intended to be a three-day occupation of the city's busiest airport. Part of a series of rallies to mark the 10th straight week of demonstrations since the protests began. We're going to be live in Hong Kong later in the program to bring you all the details. At least government is teetering after the far right coalition partner, the League filed a motion of no confidence in the Prime Minister. Its leader, Matteo Salvini is pushing the snap elections, which he hopes will put him in the top post. Parliament has been recalled from summer recess and a date for the no confidence vote will be set on Monday. All right, so we're going to take a quick break here, but coming up, what does your purchase history say about you? Cardlytics cashing in on your spending habits, and it is paying off for investors. Plus, it's the pot tech startup that gets high on data. Not weed, we find out how Akerna is tracking cannabis from seed to sale. All of that coming up, stay with FIRST MOVE.