00:00Somebody is full of the tech industry for so long. Are you surprised that the tech industry is rallying together around Tim Cook supporting him. Not wanting the FBI to be able to be sort of forced to create a backdoor into that technology. Not at all . And I think it's admirable that you have the Silicon Valley giants coming together to support user privacy in that way . However I would say that for most of those companies open is a four letter word. They want to protect the user's privacy so long as they use exclusively the products of those companies and the services of those companies and where those companies have the ability to extract personal information for their own commercial interests. So I would say it's it's more multifaceted than just this issue of the FBI versus Apple. When you look at the whole industry these companies they split into various ways various acronyms. You've got Fang you have the linked inside the Twitter side the Yahoo side for you. What is the shift is is there going to be a shift in 2016. We're beginning to reconsider big valuations not entirely in the top five tech companies in the world. Last year Apple Amazon Google Facebook and Microsoft spent 42 billion dollars on Randi. And the thing that you really see is that the large companies have the resources to pursue multiple angles in this industry. And the small companies can't keep up. If you look at the fourth quarter earnings Facebook added the equivalent of an annual year of sales for Twitter incrementally on top of its existing sales base. And Google more than that . So this is a kind of a moat around these big companies then this keeps others away from that lunch. Absolutely and not only do they have the resources but the big lesson we've learned over the past couple of years is this is a relatively young industry and there isn't very much management talent in that industry to go around which is why you see so many frequent changes in management and failed projects in these companies. Whereas you see Google Facebook these sorts of companies have very stable management teams. Does that mean that we're gonna have a race for talent if you're as critical as not in terms of we have young talent who perhaps is it usefulness or is it lack of experience. Just try and tie that. You know I think it's actually becoming almost the opposite for the last year we had to suffer through all this discussion of unicorns and these billion dollar valuations for 50 private companies. It's clear that many of them are not making the grade right now. Some of them are having down rounds some of them are struggling. Some of them are making layoffs. And I think what you'll see the large technology companies do is snap up those companies off the scrap heap where they may have had good ideas but didn't have the management talent to execute it. In terms of some of these big names that you're just discussing this morning the likes of Amazon the likes of Google you reference how much they spend on hour and day looking to the future for us. Richard and speculate about what they might look like in the future. You know we think we know what Amazon does right now. I mean Google the alphabet does right now. They might look entirely different in 10 years they might be you know car companies or what do you think these the giants of the tech world are heading. Well I think that the reason why they're spending so much an R.A. is it's a desperate search to find a business model that is that incredibly profitable is the business model that they came from . If you take a look at Google last year they generated twenty six billion dollars in operating cash flow. Their core business had an adjusted EBITDA margin of 55 percent. These are statistical outliers by two or three standard deviations of what profitability you see across industries generally. So it makes sense that they plow those profits back into the business to try to figure out where the next big thing is coming because it's so difficult to match a business model like that. It is incredibly difficult but then you see fate then you see Apple going down the down the bond issue is road to sate the investors in terms of dividends. I mean this is the balance isn't between baseball's for example reminding there's actually ostensibly this is a this is a progressive company which will spend money on or indeed versus Apple which is trying to save the shareholders. Well you say that but but for companies like Apple and Google they have a problem of return on capital not employed and at a certain point having one hundred and fifty three billion dollars of net cash the majority of its sitting offshore becomes almost a liability and not an asset. And the shareholders are right to say we're owners of the company we deserve the money back. Now in the case of Apple relative to Amazon Facebook and Google it's not a founder controlled company . So it doesn't have that one CEO who holds a controlling stake who basically dictates how those investment policies will go which is why for example you saw Carl Icahn engaged in Apple over the past couple of years .

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The Future for Tech and Apple’s Privacy Fight

Tim Cook has picked a fight with the U.S. government and Silicon Valley is joining his side. From Google Inc. to Facebook Inc., the industry’s biggest names rallied around Apple Inc.’s chief executive officer after he vowed to resist a court order demanding it help unlock the iPhone of a shooter in a terrorist attack. Cook described the request as an “unprecedented step which threatens the security of our customers” and called for a public debate. Arete Tech Analyst & Founder Richard Kramer discusses – and gives his overview of tech with Bloomberg’s Manus Cranny and Anna Edwards on “Countdown.”