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tv   Bloomberg West  Bloomberg  October 16, 2014 6:00pm-7:01pm EDT

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♪ >> life from pier 3 in san francisco, welcome to "bloomberg west." i'm emily chang. top headlines -- stocks plunge back after an early plunge. day just 24ng the points down. the turnaround came after st. louis fed president james bullard told bloomberg the fed should continue delaying the end of its bond buying program.
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>> the qe program would be open-ended, and we would be able to adjusted in response to macroeconomic developments. this is a serious macroeconomic development. >> bullard said economic fundamentals remain strong, and he blamed the downturn on europe. the white house says president obama is focused on getting answers to what happened with ebola transmissions in dallas. of president's cancellation a political trip shows the sense of urgency to see the virus is contained. republicans have criticized the administration for its response. cutting 7% ofis its workforce as sales slide. 2% as they down struggle to compete with intel. amd recently replaced its ceo.
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starbucks is introducing its first order ahead mobile app. this feature will be introduced in the portland area by the end of the year, with expansion to the rest of the country next year. the mobile app can boost sales because it will make trips more convenient and shorter. apple shows a wave of new time for the in holiday shopping season. the ipadair 32, and mini. tim cook downplayed the recent drop in ipad sales. >> we have sold 225 million ipads around the world. [applause] more perspective, if you look at the top four by volume pc manufacturers, the number of sales for the last 12
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monts, compared to ipad, ipad beats them all. >> the event was not just about ipads. apple also introduced a new 27 mini, anda new mac updates to ios 8 and os x yosemite. cory johnson was in cupertino at the event. you got to try stuff out. what was it like? >> a lot of interesting things. it's hard to cover the events and not fall in. the 225 million number, a classic moment. he said we sold 225 million, the employees started clapping. i dubiously tweeted out, then looked at my models. quarter, $225last
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million. we knew that last quarter. some of it was old news. the products are a little thinner, a lot faster, the display is a lot cleaner, but these are things that are hard to see initially. >> is it enough to get people to upgrade or buy it if they don't have one already? >> what we have seen from this, people bought so many right growth a loted faster than before. so the little incremental changes maybe aren't enough. take a look -- >> ipad sales are falling. the question is, will the new ipad air have enough innovation to bring the consumer back? here you have the brand-new ipad air 2. it's noticeably thinner. 18% thinner.
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you can never be too rich or too thin. the display is a lot higher quality, the retina display. and the image quality, really impressive. to have a display that works like this you have to have a better chip. you have a much faster, more powerful chip inside this machine. and you wanted to connect fast, so they have a faster version of wi-fi than any other tablet. and for the cellular version, a faster lte chip. and the thingh people have been asking for has been the touch id, to log into the machine using just your thumb. makes it different. it will enable apple pay as well. if this is too big for you, there is a new ipad mini. all the same features, which
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comes at a slightly lower price. there it is -- >> and you could be a hand model. [laughter] >> i'm now officially a paid hand model. i got manicures this weekend. >> what i want to talk about is the fact, we talk so much about how tablets does grow this slowing down, yet this product is still the acting biggest product at apple after the phones. accounts for 15% to 20% of revenues. this talk of the demise of the tablet, is a greatly exaggerated? >> here is my theory. the adoption of this thing was faster than any technological advancement in the last 100 years. more than 50% of u.s. households had this in less than four years, is what the numbers look like. because of that, people had it
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before they knew what to do with it. you could argue the apple software designers are so good that people, the things they do with it, email, manipulate pictures, read stuff like magazines. the new things only and ipad can do we are only starting to learn. because adoption was so f ast in hardware, the software has not caught up. that's why we start to see a slowdown. >> will adoption continue? >> yes. that's why the ibm in partnership is so important. they are thinking about specific business uses that only a tablet can do. ibm is writing software just for ipads, and those are new things. that is why the pay of and ali is so important. the thumbprint deal. we talk about apple pay. apple pay for e-commerce is a
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really important thing. the idea you can go to groupon using your thumbprint so groupon never gets here credit card,, that is a big deal. ipad-specific use cases are starting to bubble up. >> you caught up with people at the event, including gene munster. >> we had a little tim cook tim, not caught on camera, and also some gene munster time., listen to what he thought about today's announcements. >> a lot of increment of things. there was a little surprise in terms of apple pay. that was the real news, how much progress they made in the last month. >> did you wonder when they would come out with it? >> we expected it in the month of october. 10 500 banks and
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retailers, the mid-more progress in two months than ebay has at point of sale. >> but that was not point-of-sale, that was connection to the banks. >> the 500 was the banks, but they announced 10 additional retailers at point-of-sale. that is the piece ebay has had a tough time with. >> why do you think that is? is it really the name brand of apple, for something paypal is not executing? >> the brand is half of it. the other piece is technology. having touch id. biometrics makes retailers more comfortable adopting it. apple has an advantage. paypal does not make hardware. this is a classic example of apple using it hardware and software, nation. >-- combination. has become a big
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issue in this most populous state in the nation. does that affect your sales calls? >> that is something a lot of retailers struggled with. it will be put to the acid test on monday when people start giving this a try, trying to hack it. but from a technology standpoint apple should be a in a great place. >> maybe we buried the lede not talking about the ipads itself. accelerateough to sales, to get sales growth back? >> probably not. ultimately there are structural things going on with the ipad. when you had the bigger screen iphones, and they had so much traction so early when they came out, it kind of saturated some of that base. it's critical. 30% of the revenue
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today, so this was important, but in terms of really moving the needle it will not change general placys. >> they will keep the older ipads on the market at lower prices. they are getting a lot closer to things like the kindle, the oldest versions of the ipad. >> inching the low-end price point down. they have a price point for pretty much everybody. >> is the kindle the right comp in the marketplace, or should we think about the other android powered tablets? >> android makes a lot of sense. the market share as much higher. prices,ven with lower is still 20% higher than the comparable android. >> in your notes, you don't have much for apple in terms of revenue contribution. so you say good news about apple pay maybe doesn't move the
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needle for apple anytime in the near future. >> it doesn't. it does help sell devices. if people use apple pay, they will go by phones. that is how apple impacts it. >> you said it was good news for the phone. >> they made a lot of traction in a feature that will be critical to how consumers use the phone. they're off to a fast start. >> cory johnson with gene munster. next, what will demand be like for the new ipad? newook into apple for the devices.
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>> i'm emily chang, and this is "bloomberg west." just five weeks after unveiling new iphones, tim cook unveiled new ipads and more today, the
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3 andir 2 the ipad mini the new imac. all of you were at the event. horace, i'll start with you. the impression is kind of underwhelming, when you agree? >> underwhelming, we just cannot have a lot surprises. things became predictable. >> and they released the three shots of the new products. >> they did a whole demonstration about wanting to show how you can use new software. secrecy --of apple >> they made a gag of it. >> although it is not predictable, i would say it is underwhelming. hit,id chip shot, base whatever you want to use as an analogy. moving forward. >> i know the change is
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incremental when it comes to my phone and i do love it, is that such a bad thing? >> it's a great thing. the issue was, the phone was a much bigger change from generation to generation than what we saw today. they were incremental. size is the same, a litter thinner. the ipad mini 3 had to be the shortest introduction in history, five seconds. i think that's in part because the iphone 6 plus represents a serious challenge to ipad mini in particular. it will be interesting to see how that plays out. >> i was struck by every one of the things. it used to mean a lot in the pc industry when you had a fast chip. there was a time when the entire industry would turn around a new chip from intel. they talk about faster chips, wi-fi, faster lte. are we at a point now not just
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in tablets and phones, but also pc's, where the machines essentially were good enough for everything we do and we are not ticked off we can't process spreadsheets, watch a movie faster? >> i think we are. the notion of "good enough" is a real challenge to the hardware industry, not just apple. ironically, the most interesting new demonstration of technology was the retina display on the new imac. that was incredibly impressive, and it was interesting that apple saved that until last. dell has a 5k display, too, and a thinner tablet, believe it or not. hat nevertheless, to me trha shows there's innovation happening on the computer side as well. >> i spoke to venture capitalist mark andreessen yesterday. he talked about what he feels is a moment -- >> it looks extremely promising.
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andiphone 6 is a huge hit, it will be extreme the successful. apple gaining strength, you can feel it. is the company gaining strength or losing it? you feel apple is gaining strength. i think they would to extort an early well. >> today's event was predictable, but would you agree with the assessment? >> they are definitely executing on a protectable path. we talked a lot about hardware, but also realize how much emphasis they put on software. we talked the first 15 yosemite, the x, 8.1 version of ios. they will work together in an unprecedented way. they are emphasizing integration. and to your point about being
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good enough, the hardware is getting way beyond good enough, but the software is not there. a lot of complaints people have about apple and computers in general is they don't work the way they should. problems with bugs, downtime, iclooud. so as they are fixing those things, the experience gets better. >> let's talk about two competitors. they showed off the integration of maps in the new os. to create an event and you say, i'm going to this address. >> from dropbox, to a lesser consumer., as a
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it stores on the cloud service. you see them going after that. >> i am about cloud storage as a means to connect my devices and continuity to connect my devices . being a huge part of that is essential. it was great that they brought in at least the windows pc, so people who don't have all apple, they can communicate across these devices. but those cloud-based services will be increasingly important for apple as we move forward. point, we have hardware innovation slowing down, so let's see what we can do on software and services. >> bob o'donnell we will continue this conversation after a quick break. talking about apple and its future. more and ask. -- next. ♪
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>> we're back on "bloomberg west " talking about apple. i want to talk a little about apple tv. first, let's talk about the macs. they unveiled a new mac lineup. i'm surprised he compared ipad sales to pc sales one pc sales are still a big part of the business. >> they did not compare the mac sales to pc sales. that's about 8 million people world. macs in the when you compare that to ipad numbers, hundreds of millions of iphone users, the mac is a niche, and imac is a niche inside that nice, because most people use laptops. >> i thought it was the coolest thing they announced today. >> i agree. a beautiful device. when you have that high a
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resolution of display, it is on was 3-d-like, which makes the suggestion possibly for apple tv . >> mark andreessen told me apple is not making a tv set anytime soon. would you agree? >> i don't think so. >> i don't think so, either. i think the box will get an update, but i don't see them building a big panel. >> that may never have been the plan. the plan may have always been a better cable box. it seems to be a smarter business model. >> not according to gene munster. >> the other thing to remember, apple does not make these displays. they work with lg, samsung to make the displays. apple did make the controller chip in the new imac, which is an interesting innovation for apple to do. >> tim cook continues to say tv is interesting. it remains to be seen what that means. thank you both so much for
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joining us. stay tuned. a special edition of "studio 1.0" is coming up tonight with salesforce chairman marc benioff . more on apple pay, coming up. ♪
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>> welcome back. i am emily chang, and this is "bloomberg west." google reported earnings today, and there are some areas of concern, particularly with slowing growth in ad sales. google reported revenues of $16.5 billion in the third quarter, a 20% increase from last year, but net income was down 5.4% to $2.8 billion. joining us, bloomberg contributing editor paul kedrosky, from san diego. paul, are you worried? >> kind of.
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i think we will see a whole series of these transitional orders -- quarters for google. they are going to the same transformation as facebook from a few years ago as they go from being a dotcom product to a mobile product. that has penalized them, and it looks like it will continue to. the blend of revenues and growth on mobile platforms don't compare well to what they got on the desktop. that's the problem. as we transition to a more mobile universe, that will hurt them in till the transition succeeds. >> one thing, they don't break out mobile revenue, so we don't know how it is doing versus desktop. >> they sort of speaking euphemisms about it, general ter ms. we see lower cost per click on the mobile platform. we don't know exact what is
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happening. parties,w from third about a year ago we were still looking at 20% of search advertising coming from mobile. now closer to 35% in the recent period. so these are erratic changes going on in the core of google's business. that's a third-party number, but it is probably representative. >> a couple numbers jumped out. one is gross profit margins. when it looks better when the motorola acquisition was gone, that was bad news. was goingnumber, what on with the rest of their business? the google business. it looked less profitable, when it should have gotten better as they shed motorola? >> it should have been, and that is the story across the
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business. were notpeople, they expecting them to introduce a fee for google express so qu ickly. they said they would let it run for free for some time, now they are talking about what the feee will be. that's great, but a significant change in terms of how they are approaching it. a lot of it has to do with overall margin pressure they feel, in the transition from desktop to mobile. >> how much does it have to do with amazon? eric schmidt said earlier, he thinks amazon is google's biggest rival in search. increasingly when i'm shopping i go to amazon, and when i can't find it i go to google. >> i think it is a huge part of the problem. one of the things that baffled me for a long time, google implicitly pretended that on mobile you behave in the exact
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same with desktop, and that's not the case. most of us start off inside of amazon or yelp or twitter, and branch out from there. different from how we approach search on desktop. google needs to control the endpoint, but also we have big acquisitions in our future. it surprises me yelp is still a standalone company. google needs a way to get people seeing search data through another channel. >> this is a fantastic business model still. one number that looks good is the slower decline in the value of a click. %,e change was down only 2 suggesting the shift to mobile is not happening, but maybe happened, and that degradation of the model, we see the final days of that. >> yeah. even better, adjusted for
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exchange fluctuations google argues it was up 1%. not huge numbers, but it does suggest a floor. >> up is better than down. capex/.hange in . we see 50% year-over-year growth in capex spending. you probably have the numbers somewhere on your retina. it was something like 4%, 5% year-over-year, a startling slowdown in capex, even if we are talking about $2.5 billion in capex spending on data centers. >> paul kedrosky, thanks so much. google, we will have to keep our eye on, as always. apple pay will be available to millions of mastercard and visa users starting on monday, but could the credits are -- payment service kill the credit card? that is next. ♪
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>> welcome back to "bloomberg west." i am emily chang. mastercard and visa customers with an iphone 6 or6 plus will be able to ditch their credit card this monday with the launch of apple pay. the payment with retailers like radioshack and panera bread. could the mobile payment platform kill the credit card? the senior vice president of emerging payments at mastercard joins us from new york. could it kill the credit card? >> great to be here. we have a great business in the credit card business, and we expect people to be using credit weds for a long time, but feel the innovation of taking the trusted payment capability from a plastic card into a greatd device is a
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innovation, and feedback so far has been extremely positive. we see a period where they will coexist, and it is to the benefit of everybody. >> in my conversation with mark andreessen, he said he doesn't think apple pay is as innovative as everyone seems to think. take a listen -- >> apple pay, the payments in dustry is revolutionary, but also it is the most consistent. what is surprising is how many things don't change, like you put in your credit card. >> are you saying it is not that innovative? >> it is innovative, but in a way that is consistent with the status quo. >> would you agree? >> i think many things in apple pay, part of the reason we are excited is because it does leverage what consumers already do today, what consumers already have an already trust.
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they trust their mastercard, the issuing banks who provided that mastercard to them, and they like their devices. one of the things about payments, we're dealing with money in consumers who are somewhat conservative about money. they should be. bringing that experience forward into the digital age, we think that is a winning strategy. that's why we think it is a great innovation? marc is a great innovator in his own right, so i don't want to argue with him, but for us it is a great step forward. we think consumers love it. >> he thinks apple pay is a solution in the next three years, but in the long-term it is something more like bitcoin. everyone has their own opinions about bitcoin, but you think apple pay is more of a short-term solution, and will the payment industry continue to evolve so fast that in three years we will talk about something else? >> you have to deliver a certain
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set of values. the trust and security is critical. people are doing with their money, and they want to make sure it is secure. any solution has high stakes, because people use cards day in and day out. compete haswants to to deliver already a capable set of services, and on top do something different. obviously we welcome competition, but with what we are doing around innovation to make things more asecure, we are rolling out more secure cards in the u.s. all that technology is embedded in apple pay. we are doing things to make it safer by using tokens instead of a real card number. we welcome the competition, and we will see what happens. >> what does bitcoin mean for a
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company like mastercard? are at astercard, we large scale of payments, very relevant to consumers now. there will always be ideas that come forward, but we already have a very large scale way of securing transactions that works today. it doesn't matter, it's used around the world and it works. it's coming to the u.s. bitcoin is an inscription scheme scheme,ption sophisticated in its own right, but we have those technologies as well. we bring a lot to bear, including a trusted brand and reliability from issuers, and we are a known entity. mass acceptance as well. a payment product is only useful if you can use it somewhere. we have over 38 million locations you can use a
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mastercard, and that is valuable. that's what matters. >> and apple pay, we can all start using it monday. what have you done to prepare? behindhave extra staff the scenes ready to challenge potential -- handle potential challenges? >> we have been working on this from us two years, so this is a very big weekend for us. we are getting ready for the launch on monday. the work has already been done. we are making sure the systems are in fine fettle for the big day, but the last weekend is only meaningful if it was all done before. we created our own situation room so we can monitor developments, and obviously in our business model a lot of primary interaction with the consumer comes from our issuers, so we working closely with issuers like citibank, capital one, bank of america, wells fargo, all of whom are participating and will be on the front lines.
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we will be back supporting and making things successful. >> will look forward to seeing apple payroll out on monday. thanks for joining us. >> thanks, emily. >> coming up, grammy award-winning artist on his new wristband. can it ca compete with the apple watch? ♪
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>> i'm emily chang, and this is "bloomberg west" on bloomberg television, radio,'s reaming on your phone, tablet, and he is more than a triple threat. he is a founding shareholder in beats electronics, and now has his own smart device. not a watch, he said. unveiled his new "puls ."
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i spoke to him about the wristband, and asked him how long he has an wearing it on the road? >> i have been wearing it for about two years. >> and in public you would walk around with a sock on your hand so no one could see what it looks like. >> most people thought it was a fashion cuff. didn't know i was making phone calls, doing text messages and e-mails. >> this is the first week you are showing it. >> the operating system, to let people know it's untethered. you don't need a phone for it to operate. i can communicate, go on twitter, instagram, facebook. ther'e's voice navigation. i can compose e-mail, text messa ges, without a phone. >> how have youhoned what the final product is? >> bringing partners in. salesforce are big supporters.
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they invested, they built a customized enterprise app on our platform. this is just me and my team, engineers. i raised the money after i seven the initial build, figures, a company i started, and they created the map on the device. you can say, give me the safest route home, give me the safest route to my job, give me the scenic route home. is this a safe neighborhood i'm in? all that data is streaming, baked into the operating system. you just ask anita questions. anita is the virtual assistant and voice navigator. >> why buy this over the apple
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watch or samsung galaxy gear? >> when you are putting something on your body, people want options. if you have a pair of louis vuitton shoes. if you have adidas, you probably have nike. when there's something on your body, you need options, so we provide an option. when i was a kid, i used to dream one day i would go to michael jackson concerts, because he was the king, and still is the king. but that did not stop me from making music. apple is the king. >> so a family of wristwatch devices? >> you need someone to visualize and envision a whole new way of what the wrist does, what it connects to. we have done that. we have jackets wear when the
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sleeve touches the watch you have 2.5 days of power. you pack more power in a jacket than a device. otherated components so fashion houses could build jackets and garments with power. >> where is the future of wearable going? on one hand, we need technology to augment what we can do on our phones or tablets. on the other hand you are wearing it and want to look good. it is an expression of you. peoplerables right now, are barely stepping into it. people who are dictating what a wearable is, a technology company, not the fashion world. the fashion world has not directed what a wearable looks like, and that's what we aim to do. yesterday at my keynote i
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there, andre liantalli representing the fashion world. how important it is for fashion to be in the fold. we have done a good job doing that. the device on my wrist, when people side before they knew it was functional, they thought it was a chanel cuff, a fendi cuff, a gucci bangle. now they know it allows me to communicate. wholeu can see a different conversation about wearables in the next five years, and we aim to be the one that leads the conversation with our jackets, shoes that weigh you, count steps. >> what about music? you are in a unique position to talk about this because you are in artist and cofounder of beats. you said itunes is the scariest thing in the world. what is apple's future in music with the arrival of streaming?
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>> did i say it was the scariest thing in the world? >> according to "the hollywood reporter." what do you really believe? >> i believe everything is up for grabs right now. mightlikely candidates vision a whole new way of streaming, and we aim to dfo that. i'm still close with beats, and know, my mind on, you consulting on what beats music is. vine is still my mentor. >> can apple dominate downloads, or is that someone else? why doesn't apple by spotify? >> because they have beats. beats music is an amazing streaming platform, amazing. >> so when it comes to streaming
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and the new way of listening to music, is apple going to be as big of a player, or -- >> like i said, i think it is up for grabs, and our vision around streaming, i think it's going to be pretty awesome. >> it is up for grabs. grammy award-winning artist and .repuls creator time for the bwest byte, one number that tells a whole lot. >> the bwest byte is 2. the most interesting innovation into indications coming out of the apple events. this. >> what is that? >> the inventors talked to me after the shoot. a new communications device, i cups, it probably has better sound than my iphone half the time. >> i don't know if it's -- there
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you go. it works. >> you can hear me fine. they're hoping it will be a hot product for the holiday season, a gag gift. yet to be sued by apple. the inventors of this important communications device were outside the apple event. >> this is not for sale in the apple store. >> there is a kickstarter campaign. >> can i take this home? we will split it. >> i can talk to him. are you still at work? >> great coverage today from apple, and from you. when are they going on sale? >> next week. apple pay launching monday. new ios next week. >> just in time for the holidays. thanks, and thank you all for watching. don't miss " studio 1.0" tonight
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with mark benioff, chairman and ceo of salesforce, 8:00 p.m. ♪
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