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tv   Bloomberg West  Bloomberg  January 21, 2015 1:00pm-2:01pm EST

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>> live from pier three in 10 pieces go to "bloomberg west." here is a check of your bloomberg top headlights. the european central bank president has proposed spending as much as $1.1 trillion in additional stimulus to boost the european economy. recommending asset purchases a 50 billion euros a month until december of 2016. the ecb is talking about that plan at a meeting today. the stimulus plan could still change. the obama administration is not
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happy as john boehner extensive an invitation to an israeli prime minister before a key vote of iran sanctions. >> i have invited benjamin netanyahu to a joint session of congress on the grave threats of radical islam and the threat that iran poses to the world. >> the press secretary calls the invitation a breach of protocol as the executive branch is not notified about the olive branch. isn't samsung the biggest smartphone maker in the world dropping qualcomm chips? people say samsung has decided not to use the new qualcomm chip after it was it shown running hotter than the samsung benchmark. they say those reports are wrong
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and snapdragon will still be in the new phones. amazon has already pulled out of its own amazon branded diapers just a seven weeks after they hit the market. they say the diapers need improvement based on early customer feedback. i think the customers are a bunch of whiners. they will keep selling their own baby wipes. did the lead -- worst than advertised. wall street analysts sounding eight downward tone. "the falloff in traditional business is dwarfing ibm's ability to capture new revenue opportunities." let's do a quick drill down. the first number is the revenue. the revenues continue to
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decline. that is a problem for this business as they try to make the payment entered into a business -- pivot entered into a business -- they borrowed so much money to buy back shares. that debt is now mounting with long-term and short-term debt adding up to $41 billion. as the debt gets bigger, the free cash flow gets worse. down $13 billion this last year in spite of all the acquisitions . joining us to figure out what ibm will do about the falling revenues and rising debt and falling cash flow, bloomberg news and bloomberg intelligence. those debt issues -- it is starting to loomis a real issue for this company. >> i have talked about this before with you.
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as long as there is a decent ability of revenue for some time , i don't think investors will have that much concern about the debt issue. the need to be more concerned about how the free cash flow will be generated going forward. >> it is getting worse and worse. i know you were monitoring the conference call last night. analysts don't like the sound. what was the tone of the call? >> the tone was a bit of a refresh. you have to be very nuanced here at these ibm calls. they are very bullish on their future perspectives. it did seem like the cfo came out and said look we are going to take a profit hit this year. that was a bit of what investors were looking to hear. i don't to get was enough. shares are down as much as 4% earlier today, the most since last quarter. investors were looking to see what happens in 2015 and
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schroeder did not give that. they given eps guidance for the year the range about right at the below and. investors want to hear more. now, they are stuck waiting for this investor conference in february. ibm is kicking the can down the road. >> i was struck by some comments in the third quarter when they said the software sales some execution issues, but next quarter, they should close. software sales were week. what were the biggest weaknesses? >> we saw a revenue decline across all major businesses and all geographies. it seems like where they need to bring things forward is this software division.
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what they are really struggling through is taking these legacy offerings they have and either updating them, retooling them or introducing new things delivered over the cloud. these clouded delivered products can push down margins. they're giving customers more flexibility. that means they're not paying that hundred million or whatever the number is up front. they're able to gain what they need, which could mean buying less from ibm. keep an eye on software as the future grows because it is what they are putting a lot of emphasis on. >> i rated the results last night. i felt like the ghost of amazon was so present. so present in the competition that ibm is facing right here. ibm which used to margin with an army of consultants and servers
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and lots of software and the notion that if amazon can give you the sales force automation you want and be ready when you need it, that seems like it is destroying the basic business model of ibm. >> amazon, google, microsoft are driving down costs of cloud computing solo. you will hear companies like ibm talk about the hybrid cloud. things they think they can charge higher-margin for because it's perceived as higher value. ibm is going through a massive transformation right now. you have to spend a lot more money for data centers, extending into geographies in order to compete with some of these larger vendors. they are the same providers of the legacy i.t. infrastructure which gets cannibalized when he start going down the path of cloud-based services. >> the currency issues they
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reported that hurt results substantially in the fourth quarter not getting better in the first quarter of this year. that could really hurt these guys with sales in europe. >> the currency is going to be a problem for a lot of us-based technology companies that generate a large portion of the revenue from outside the u.s. the crux of it come investors want to figure out where growth will come from. that is the $60,000 question. >> the world of technology cares as well. thank you very much. net neutrality got a big mention from the president last night. president obama is vowing to keep the internet free and open. will his words cause any sway in capitol hill? ♪
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>> this is "bloomberg west." president obama renewed his bow to protect a free and open internet. that deal is not done. net neutrality is up for debate on capitol hill today. subcommittees in the house and senate are holding hearings right now to review the actions congress could take next month at the fcc vote. joining us from capitol hill, peter cook. very interesting that this is happening, of all things neutrality. >> the hearing so far, one in the house so far and one in the senate this afternoon has been very interesting and enlightening to both republicans and democrats. it has been a substantive hearing come a lot of good questions being asked and a lot of analysis been offered up by members of the internet community. you have amazon executives, the fcc and top lobbyists for the
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wireless and cable industries come all waiting in on what republicans are offering as they are legislation to bypass the fcc. they want to beat the ftc to the punch. they think the regulatory rules are a mistake and will harm the internet economy. fred upton on the house side and john kuhn on the senate side -- john thune on the senate side. we heard from a top amazon executive here in washington weighing in. the bottom line for amazon, it does not matter if it's the fcc or congress, then neutrality needs to remain. >> it's one thing customers should not need to care about. they should not need to care much about where in the statute their rights are protected. were net neutrality is extended.
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it can be done in the congress. i would suggest that consumers don't care. they want their net neutrality. >> what the republicans are proposing in this draft bill achieves some of the same things tom wheeler has been talking about and the president has been talking about. it would prevent any sort of paid prioritization. no fast lanes . the big difference between what republicans and the ftc are talking about, new ability to classify broadband as anything other than an information service. it would not be a telecom service. that is the big difference and there has been a lot of debate in this hearing about whether or not congress should step in here or whether the fcc has latitude to do it on its own. >> the exact same issues the fcc has been talking about. thank you very much.
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the debate about neutrality raises on this rages on. one of the copies that rely on an open internet? -- what are the companies that rely on an open internet? what do you make of the tension that congress -- attention that congress is paying to this now? >> the interesting thing from our conversation, we were talking about our rules needed at all. today, the conversation is how do you put those rules in place? they are agreeing that rules are needed. the question of what is the mechanism and tools needed. >> who has changed their mind? it was not too long ago they were saying no change is needed. >> republicans have taken real steps. the sec chairman is five weeks away from voting on rules and we have a chance to see what rules
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come out of the fcc and five weeks. it is disheartening -- it is heartening to hear republicans and democrats saying that rules are needed to protect open internet. >> what is it that makes republicans against this now change their mind? >> the one piece they were talking about is should the fcc reclassify broadband providers as intel communications service -- a telecommunications service? >> title to. -- title two. companies have a responsibility to public and therefore have to offer services in a fair and open way. >> exactly. that has been the sticking point from republicans and democrats.
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amazon nailed it from a consumer standpoint we are result oriented. we want to make sure the internet is open at the end of the day. users don't care about how that happens. they want to make sure they are protected and the internet is open. >> that does raise the cost for the carriers. there has been a lot of money spent lobbying on that side of it. the internet association -- your members have spent a lot of money lobbying this issue as well. google is spending $13 million and facebook is spending $7.4 million. all spending a lot of money on lobbying. are they getting what they are after? >> i think today, the
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conversation has shifted. there is broad recognition that prioritization needs to be blocked. i would rather have the conversation on how to protect users than having the conversation be should we protect users. >> one wonders what this will mean going forward when we look at the comcast-time warner merger. whether or not that one company should control so much of the internet. the conversations today might informed that decision as well. >> the debate has certainly overlapped. everybody is optimistic that rules will get put in place in five weeks. no one has seen the proposal yet. early indications are it is heading in the right direction. after that, we will see what happens with congress. we can feel a bit better now that the debate has shifted to how and not if. >> thank you very much.
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we appreciate it. president obama calls for an aggressive server security legislation. -- cyber security legislation. they will have big brother on their side. ♪
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>> president obama says the u.s. could face heightened risks cyber security legislation is not passed. here's the president during his estate of the union address last night. >> we are making sure our government integrates intelligence to combat cyber threats. irish this congress to finally pass the legislation we need to better meet the threat of cyber attacks and combat identity that
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and protect our children's information. -- i urge this congress. >> will companies support the president's plan? turning to the chief strategy officer at -- very interesting, the conversation has dramatically changed. because of the sony attack more than anything else. we have never seen a business targeted by a nationstate before. >> thanks for having me on today. i think it has changed. the threat landscape when you look back 10-20 years ago, people try to hack for notoriety and publicity. today, it's about money.
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organizations need to do everything they can to safeguard their information but also be able to react when they do experience a breach. >> what part of the legislation is best about what could be passed? >> it is a noble first step. last night, we heard the president talk about cyber security just a little bit. for cyber security to get into the state of a union is a big deal. the president has to talk about all kinds of different things going on in the world and cyber finally got the first notice that this is important. we need to come at this as a team. >> from a legislative standpoint we have some any companies in silicon valley whose businesses have been harmed by the nsa must policy of gathering information.
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those companies don't want to have to share with the nsa or fbi. the president is suggesting they have to do that. it would help them protect themselves. where do you hear your customers ? >> i sat with the director for 3.5 years. ira member when i would go out and visit companies and people would bring up nsa or some type of information gathering. you have to realize you think about being an fbi agent, you have to balance trying to stop bad things from happening, try to put that people away but it's the only organization there to safeguard your liberties. you say i want to stop bad things we need access to information. if we are going to live in a safer world, we are going to be able to go after those people
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who want to do harm to americans and our allies and businesses. >> i was reading a story saying there are more new york police officers then fbi. i think about what their capabilities are to fight cyber tyre is a. -- cyber terrorism. >> the new york city police have more police officers in the city than all of employees at the fbi. we are a very small group but very dedicated. these men and women go out every day trying to protect american citizens. they are trying to do their best. i got into programs where i would sit there and look at the person briefed me and go who would some that up? we have those tools. >> thank you very much.
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we really appreciate your insight. amazons latest venture feature films. we take a look at that, next on "bloomberg west." ♪
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>> you are watching "bloomberg west." on cory johnson. just a week after amazon took home a golden globe, they plan to take on hollywood. they will create 12 feature films every year. they will be released in theaters and then available a few weeks later to amazon prime customers. a veteran movie studio executive for top production houses with
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me now from new york. the theater owners have always had such a sway over hollywood. i'm wondering if this business model from amazon, how much the theater owners might react to that negatively. >> this is a continuation of a trend that is new in the last few years. a real frontal assault on the traditional theatrical movie business where theaters would have exclusive rights to show movies without any competition from any other distribution sources. with the growth of netflix, amazon, streaming in general, that has been called into question. right now, the theater owners are not going to give. eventually, it will change. this is part of an evolutionary process that will change the way movies are disturbing it. -- distributed.
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the viewers have changed their viewing habits. people are still going to movie theaters but they are also watching movies on their laptops and tvs. there's a variety of ways that have changed the whole world. >> why do you say thank god? >> i happen to be a traditionalist in terms iof i like seeing movies and movie theaters. there's something about the experience that is thrilling and exciting and fulfilling. i am also -- i have two competing thoughts here. the growth of places like amazon and netflix has meant there is far more outlets available to the creative community. there is more opportunity to create content in more ways to get that content to the audience. one of the significant things of the amazon decision, they made it clear they will make a certain kind of movie.
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movies and the $25 million budget range which is primarily independent kinds of movies. we are not talking about transformers 98. >> don't rip on the transformers. it is interesting to me would like i'm making contrast. -- it is interesting -- >> i'm making contrast. >> moviethe awards. it has to be in a theater to be eligible for oscar. i wonder if that is part of the marketing plan for amazon. to get the attention that house of cards got for netflix. >> amazon already got huge benefit by one of its tv shows
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getting the golden globe award. they got a huge buzz and huge publicity off that when. -- off that win. when you are doing lower budget movies part of your strategy is to do the original material that will appeal to certain audiences and will get awards that will encourage people to go see it. on the flipside i thought last week what was interesting is you could see the power of the oscar nominations when you had the success of american sniper last week. it got six academy award nominations. the marketing effectiveness of awards can be really helpful. >> i remember when i was at nyu people were excited about a graduate student named spike lee.
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i wonder what your students think of movies going right online. things going to youtube heard if they still think about feature films. >> young filmmakers today have to adopt a multi-pronged strategy. i would say they still would like to have theatrical releases for the movies but recognize the value of youtube and online to get noticed. when you are a young filmmaker, today, you can get the attention of hollywood without going to hollywood or actually getting an agent or studio behind you. if you can create something that stands out that his original and simultaneously build a social media following, you can get discovered. in some ways, it's easier today. it is exciting and students recognize there is multiple ways
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to get noticed today. they still like the theatrical release. i'm about to go to the sundance film festival tomorrow. i was advising some alums, look getting a release at this stage would be great but as a young film maker, if you have a film in the festival and it gets you attention and noticed and leads to other movies, that is a win too. >> bring your skis. nobody's on the slopes next week. thank you very much. a press technology -- we will talk about that, next on "bloomberg west." ♪
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>> this is "bloomberg west."
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shazam raised $30 million in funding. investors were not aimed but the list includes a couple of billionaires. the chairman spoke to bloomberg about what the company is aiming for its ipo. >> being private gives us some any choices around our strategy. at the same time we do believe she is and what make an excellent public company. -- shazam would make an excellent public company. >> that was quite -- they plan to use the new cash to go into new markets and improve their technology. advancements in open source software, mobile, cloud computing push the enterprise sector is a new one. we see it in the result of ibm.
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i want to talk about that with an enterprise investor. as we look across what is going on in enterprise i been wanting to have you on the show for a while and we see the ibm result yesterday. i see them getting walloped trying to sell some of the same old stuff. hardware, software, services. they're bumping into new companies. >> we are at a point in time -- enterprise tech has been around for a while. >> i thought you would start with cisco. >> i get my old employer great credit. i think we are at a point in time where there are a set of new transformative trends technology disruptions happening.
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20 years from now, we are on the show talking again talking about another set of names. the roots of those changes are happening right now. >> it's also interesting that some of the companies are having success are new companies. why are the new companies succeeding with the old companies can see those trends? >> it is fundamental that some of the old hold on to their existing business models. if you are trying to go mobile company that does not have a suite of mobile products will suffer. some of these newer technologies have been adopted by younger companies and companies were willing to take the risk over technology that might be perfectly secure but are willing
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to go out and build components for that. sometimes those things are disruptive or painful for incumbents who have a surfeit -- certain profitability model. >> let's run through those companies. enterprise security >>. security is -- we are going through the sony hack. one of the biggest themes here we are seeing. if you think about, security has always been an issue. these threats have been burglaries -- if you look at what happened to sony, that is an accidental threat -- existential threat. cyber threats are elevating themselves to the level where there is complete disruption. >> the biggest companies cannot respond to changes? the very notion was always we
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will respond to the newest threats. >> most of those companies, they will throw a suite of solutions of the problem but they are not looking at the latest threats or hacks. it opens up an opportunity to come and look at new kinds of attacks that exist, whether mobile or cloud. all of these new attack surfaces are not in the business of mobile or cloud. >> infrastructure -- i have a hard time figuring out which infrastructure companies matter in which don't. >> you have to look at the underlying themes that are transformative. take storage. one of the key things happening is disk-based media to flash. it is now becoming an enterprise trend. >> solid-state drives.
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>> they call them -- a few companies want to take a big risk saying they will go strictly flash. they are doing great. there you see fundamental transformative themes happening in the researcher business. >> the data architecture itself is changing. you can write to multiple drives. >> of course be do have those components and a lot of other benefits, too. in the data architecture side what you see happening is we have a big problem with a lot more data than we deal with. yet to make storing it a lot
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cheaper. managing it is a lot harder. but as we have technology that traditional databases cannot keep up with anymore. it allows you to discover the right in a point amidst this vast group of data. >> thank you very much. we appreciate your time. "bottom line" is coming up at the top of the hour. >> we will continue our analysis of last night's state of the union address where the republican majority in both houses -- our president obama's goals attainable or dead on arrival? what are the areas of compromise? i will ask jon huntsman. the highest level u.s. delegation to cuba in decades began talks today. villa marks will join us live
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from havana. >> he went to cuba? >> he went to cuba. >> shocking. thank you brian much. next, sports programming. -- thank you very much. creating some really cool videos. ♪
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>> i'm cory johnson and this is "bloomberg west." the company called whistle sports focuses on the clips you won't see on espn, like this.
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you should have seen the outtakes. joining us of the founder of whistle sports. that was awesome. the bowling ball curving around the heads of people laying down on the lane. what is whistle sports? >> we focus on young millennial's. this generation between 13-34 that have a very different media habits and different sports media preferences. from the beginning, the objective was to give them their own authentic type of sports media on the platforms of today, social media platforms that are increasingly adopting short form video as a primary media concept. >> you are the ceo of this company. what was the sort of inspiration for this?
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people have been trained to do media around these alternative sports for decades. >> i have three young kids. i sold my last company to a public company and took some time off and i was at home. while i was at home, i watched how they were consuming media and it was very different. they did not want to be broadcast to. they wanted to lean forward and gauge the content and have a social and digital conversation. when we started looking at sports, they had youtube sports heroes. they wanted to follow global sports, which is a very different media have itbit. we felt they were underserved. >> the youtube numbers are interesting. it demonstrates the long tail approach. the notion you can have lots of channels that will appeal to the
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varying interests of a big group. >> the way that media is evolving is all about each. -- about niche. we will be up in the thousands. are lots of individual sports that might not get traditional media coverage but there are global fan bases. they can really harness that with social media. >> the big issue with that those partners you have to get involved in some way. you have partners in the nfl and pga. they don't want their stuff online for 20 viewers for watch. don't they all want to be getting big licensing fees? >> different leagues are at varying points of progression
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towards where our demographic lives today. part of the value to our league partners is we have 13 million subscribers. we are growing by 2.5 million a week. we are able to take that young millennial audience and reengage them around traditional sports and traditional leagues in a way that is unique by bringing a youtube sports partner like the perfect -- dude perfect to a facility with pro athletes and provide that authentic view of sports that resonates with this demographic more than traditional sports or typical coverage of events. >> one of the toughest things for media is having things that are high enough quality and low enough cost that you can survive on a channel that has a couple thousand viewers.
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what do you do to make sure this stuff is really good but cheap enough to produce? >> great question. the bulk of our video is graded by the community we have across youtube and the other social platforms. we are crating 1000 videos a month across that ecosystem. we partner with the leaks. -- with the leagues. when you involve the community it is cost-effective. the best rises to the top. audiences find the great talent. it is still about quality content and entertaining content. our demographic defines quality differently. >> interesting stuff. the founder and ceo of whistle sports. the headline just crossing
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bloomberg that uber is still in talks to raise $600 million from investors. maybe extending this route. it is time for the bwest byte. one number that tells us a whole lot. here is brad stone. >> 77 million. that is the capital raised by the former hulu ceo to start another site called vessel. consumers pay two dollars a month to get exclusive access command window to premium content. >> get all depends on the content, doesn't it? >> it is a great lineup. they have jeff bezos funding it. >> thanks for joining us.
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>> from bloomberg world had courtesan new york, i'm mark crumpton. -- bloomberg world headquarters in new york, i'm mark crumpton. this is "bottom line." to our viewers in the united states and those of you joining us from around the world welcome. we have full coverage of the stocks and stories making headlines on this wednesday. scarlet fu will join me for a roundtable on china's economy. peter cook is on capitol hill


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