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tv   Bloomberg West  Bloomberg  January 21, 2015 6:00pm-7:01pm EST

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>> live from pier three in san francisco, welcome to "bloomberg
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west was quote where we cover innovation, technology and the future of business. u.s. stocks closing today higher with some modest gains. the big news came out of europe this morning where the ecb is discussing a new 1.1 trillion euro stimulus to boost the euro zone economy. here is tony blair speaking to bloomberg in dominoes. >> what is necessary for the eurozone is a coming together around a popular -- a proper stimulus combined with a profound structure reform it's the only long-term route to competitiveness and the only way to give credibility to any macro measures such as the european central bank might take. >> the stimulus measures are not a done deal. the plan faces an intense debate with the ecb governing council. the cuts will hit the company big time taking a $313 million
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fall already. meanwhile, fourth-quarter sales dropped and net income is up 11%. the microsoft ceo issuing a preview of what they are calling windows 10. it's a new web browser they are calling project spartan. they also showed off goggles that augment the world of games and apps and happy visions of the future. ebay facing a challenging future as it tries to spin off paypal. they're going to laugh 2400 people, 7% of the workforce after sales did not grow much. it was the slowest holiday quarter gain since 2010. meanwhile the company says it
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has reached a standstill agreement with carl icahn and is exploring options for enterprise. one of carl icahn's board nominees is jonathan doro who will be joining us later on. after yesterday's earning, this is what we heard -- very weak -- worse than advertised. wall street sounding a dour tone after fourth-quarter results came in below expectations all stop -- below expectations. before we talk about it, let's do a quick drill down and look at some of the issues ibm is wrestling with. first of all there is falling revenue growth, a big deal for this company in year after year.
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the falling rate is getting worse and even as those revenues are falling, the company sees its debt growing. that is mounting in ibm, up to $48 billion in current and long-term debt reported at the end of the month. that is significantly up because the company is borrowing money to pay dividends and buyback stocks because it's free cash flow is falling. earnings per share are going up but the free cash flow the rate of free cash flow shrinkage, if you will, also not good. that's all kinds of that news. joining us to talk about that is our bloomberg reporter from new york. before the bloomberg west show it was alex is not as worried as corey is. >> my big take away was what
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investors were looking for was not necessarily what they got. we were looking to get some kind of guidance moving forward and we got an etf range and a free cash flow number. but it wasn't necessarily the strategic outline investors were expect things from ibm. she was not on the call this go around after she was on the call and stopped the roadmap. >> year end results, especially when the results are going to be so crummy, you think the ceo might want to be there and offer some guidance. >> that is the typical ibm shtick -- the ceo is not on the call. but with her coming on last quarter wanting to reassure investors, we expected her to be on. she will be expected to address
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investors when they have their investor day here in the city, but that is where we are looking to see the next steps from this company. shares were off about three point 5% and investors are maybe not as happy with what is going on and with the lack of visibility here in terms of what is next for ibm. >> investors aside, i think the role of ibm and the role of technology couldn't be more important historically. one of the things these results start to point to his other companies standing up and being important on the software side. on the hardware side, the computing power and processing power, everything you want, you don't have to buy anything ibm is slinging in terms of hardware and consultants. you don't need any of that if you go to amazon web services
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and that's a big changing of the guard. >> these to manage the whole stack and now customers are looking to maybe cut corners a little bit. you have some smaller contracts, which is not typical for ibm and they can go to different players like salesforce that kind of value chain has then spread across what ibm used to capture itself, and that has been a struggle for the company. a lot of what they do is maintenance and services and it's their biggest business. if they are not doing services on this entire stack it taking up some of the contracts ibm is used to getting and that might be some of the pricing pressure you hear them talking about in terms of the services and software business. >> if tom keene were hosting this show, there would be a drinking game every time someone says stacks on this show.
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you and i talked about this on the radio today -- i do it every day with carol massar and mike mckee, but hard issue ibm is up against is a 50% gross margin competing against the likes of amazon. ibm is moving their business into a place where price competition is brutal. >> and that is pushing what there's shtick has always been. they have always touted these fat margins. the cfo came out yesterday saying there might be some struggle in that area especially for cloud-delivered products. that will be an interesting thing to keep an eye on with their growth business. >> net neutrality -- that neutrality -- we will talk about what obama had to say about keeping the internet free and
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open. ♪
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>> this is "bloomberg west." president obama renewed his vow to protect what he called a free and open internet last night. net neutrality is up for debate on capitol hill. subcommittees in the house and senate are holding hearings right now to review the actions congress can take ahead of next month expected fcc vote. joining us from washington is peter cook. very interesting this is happening of all things to debate the day after the state of the union, net neutrality wins the day. >> and more surprising than that the hearing so far, there has been one of the house and one of the senate -- it has been very interesting and enlightening to republicans and, kratz. i would say has been a substantive hearing with new questions being asked and a lot of analysis being offered by members of the internet community. amazon ceo testifying and the e
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tsy ceo testifying as well as cable industries, weighing in on what republicans are offering is a draft registration to bypass the fcc. they want to beat the fcc to the punch. they think the regulatory rules being put forward are a mistake and will harm the internet economy. fred upton on the house side and don thune on the senate side have offered a draft proposal that is being debated here and we heard a short time ago from a top amazon executive in washington weighing in. it doesn't matter if it is the fcc or congress, that neutrality needs to remain. >> it's one thing customer should not need to care about. they should not care and they shouldn't need to care much about where in the statute their rights are protected where net
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neutrality is extended can be done in congress or at the commission or a mix of the two. i would suggest consumers don't care, they just want their net neutrality. >> what the republicans are proposing in this draft bill achieves some of the same things the president has been talking about. it would prevent locking and throttling of content online no fast lanes in the republican legislation. it would apply to both wire lines and wireless. the sec is talking about no ability to classify broadband as anything other than an information service. that's the big difference in their has been a lot of debate in this hearing about whether congress should step in and whether the fcc has the legal ability to do it on its own. >> those are the exact same issues the fcc has been talking about. chief washington correspondent peter cook.
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as the debate about net neutrality rages on what does it mean for companies who rely on an open internet? with me now is the president and ceo of the internet association, the lobbying association formed by facebook, yahoo!, google and others. what do you make of the attention congress is paying to this right now? >> the interesting thing from our conversation two or three months ago as we were talking about our rules needed at all? today, the question is how do you put the rules and to place? both democrats and republicans agree that it is needed to protect the startups in the economy. >> who has changed their mind where elected officials have gone on the fence here? it wasn't too long ago they were saying no change was needed. >> the republicans have taken real steps forward but the fcc, chairman wheeler is five weeks away from voting on rules.
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it is certainly heartening for all of us to hear republicans and democrats say enforceable rules are needed to protect an open internet. >> so what is it that made the republicans who were against this change their mind and decide there for some sort of regulation on the internet? >> the one he's they were talking about in the previous segment is should the fcc reclassify broadband providers as a telecommunications service versus an information service. >> title ii -- let me paraphrase it -- it essentially says companies have a responsibility to the public and have to offer services in a fair and open way even though that might raise costs. >> exactly. that has been the sticking point for republicans and democrats.
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paul mizer from amazon nailed it from the consumer standpoint -- we are results oriented, we want to make sure at the end of the day that the internet is open and for 99.9% of internet users, they don't care about how it happens. whether it's congress or the fcc, they want to make sure they are protected. >> that does raise the cost for companies like comcast and beyond. a lot of money has been lobbied on that side of it. the internet association they've spent a lot of money lobbying as well with google spending $13 million and facebook spending 7.4 million dollars and right on down the line. are they getting what they are after?
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>> the conversation has shifted and there's broad recognition that internet users need to be protected. i would rather have the conversation on how to we protect users rather than have the conversation be should we protect users? i wonder what this is going to mean going forward? whether or not that one company should control so much of the internet. it might inform that decision as well. >> the debate has certainly overlapped and everyone is optimistic that rules are going to get put in place will stop no one has seen the proposal yet but early indications are it's headed in the right direction. we can all feel a little better now that the debate has shifted to net -- two how, not if. >> thank you very much will stop
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president obama calls for an aggressive cyber security legislation last night. we will look at whether or not this will really protect american companies from cyberattacks and if they will have a brother on their side next will stop -- on their side next. ♪
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quote quote
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>> president obama says the u.s. could raise heighten risk if cyber security legislation is not passed. here is the president during his state of the union address last night. >> we are making sure our government integrates intelligence to combat cyber threats just as we have done to combat terrorism. tonight, i urge this congress to finally pass the legislation we need to better meet the evolving threat of cyberattacks combat
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identity theft, and protect our children's information. that should be a bipartisan effort. >> will companies support the president's plan that mandate information sharing between business and intelligence agencies? joining me is the chief strategy officer chas:. -- chas full men. very interesting the conversation has dramatically changed because of the sony attack, maybe more than anything else we've seen in business. does that change what companies want for cyber security? >> first, thanks for having me on. the threat landscape, if you look back 10 or 15 years ago, people have tried to hack for notoriety and publicity. if you have information that is valuable to someone, they will come after you.
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organizations need to do everything they can to safeguard information and be able to react when they do experience a breach. >> what in the president's legislation is best about what could be found? >> it is a noble first step. last night, we are the president talk about cyber security just a little bit. when has that happened before? 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 and we need to come after this as a team. >> we have so many companies in silicon valley whose businesses have been harmed, they say, by the nsa's policy of vacuuming up information and it has hurt their ability to sell internationally.
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they don't want to share with the nsa and fbi and the president suggests they have to do that and it would help them protect themselves. what do you hear your customers starting to say? >> i sat with the director for three and a half years and i remember when i would go out and visit companies and people would bring up the nsa or some type of information gathering would come up and i would say you've got to realize the good about being an fbi agent. you have to balance trying to stop that from happening and put bad people away. but it's the only organization that is there to safeguard your civil liberties. think about you being in that job and saying i want to try to stop that thing but we need access to information. we have to empower some organizations to go after people who want to do harm to americans
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come in to our allies and to our businesses. next there is an old "new yorker " story that says there's more new york city police officers and fbi agent. i sure to think about what their capabilities are to fight hyper terrorism. does the fbi have enough resources? >> the new york city police have more police officers in the city than all employees at the fbi. we are a very small group but very dedicated. these men and women go out every day trying to protect our citizens trying to do their best. i can't talk to you about the programs there but i got run into programs where i was that there and look at the person briefly and go who thought that up? some of the things you see, we have those tools. >> you can tell me during the
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rake all of the secrets. >> amazon's latest venture -- feature films. can amazon compete with the major studios? we will look at that next on bloomberg west. ♪
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>> you are watching "bloomberg west" were we focus on innovation, technology, and the future of business. just a week after amazon's dig when at the golden globes, it has plans to take on all of hollywood. the e-commerce giant has announced it will create 12 feature films every year. some movies will be released in theaters and be available to amazon prime customers a few weeks later. but can amazon really make it? my guest is a veteran movie and film executive.
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let me ask you theater owners have always had such sway over hollywood and i wonder how this business model of amazon taking stuff to the theaters with the intent of quickly getting them online, how theater owners might react to that? >> this is a continuation of a trend that's new. there's a real frontal assault on the theatrical movie business where theaters have the exclusive right to show the movies without any competition from other distribution sources. with growth and streaming in -- growth in the streaming in general, that has been called into question. right now, theater owners are not going to give, that eventually, it's going to change and this is part of an evolutionary process that will change the way movies are distributed. right now, as you know, the
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audience or the viewers have changed their viewing habits and people are thing. still going to movie theaters that are also watching movies on their laptops and tv sets. there's a variety of way content is getting to people that it changed the whole world. >> the elegy aside, why do you say thank god? >> i happen to be a traditionalist as in i enjoy seeing movies in the theater. there's something about that experience that is thrilling and exciting. on the other hand, i've got to competing thoughts here. the growth of places like amazon , netflix, hulu plus -- it means there are far more opportunities to create content and more ways to get the content to the audience. one of the significant things of the amazon decision, they made it very clear they are going to
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make a certain kind of movie. they are talking about movies and the $5 million to $20 million range, you're talking about independent movies like "grand budapest hotel." we are not talking about "the transformers." >> don't rip on "the transformers." wasn't that made by an nyu graduate? this opens up those -- this opens up amazon to awards. -- >> i missed something you said there. >> awards. they've got to be in the theater to be eligible for oscars another awards. i wonder if that's part of the marketing land, to get the attention house of cards got? >> amazon already sides gotten huge benefits from one of its tv
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shows getting the golden globe awards. they got a huge buzz and publicity over that when. it's the first time a show like that had won a golden globe. when you are doing lower budget in the movies, part of the strategy is to do original material that will appeal to certain niche audiences and get awards that will encourage people to go see it. on the flipside, what was interesting last week's you could see the power of the oscar nominations when you had the success of "american sniper" and then got six academy award nominations. that shows how the effectiveness of the words can work. >> ira member when i was an undergraduate at nyu, undergraduates were running around talking about a graduate student called spike lee.
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i wonder what your students think of movies that are going right online and ink of things going to youtube -- if they are still thinking about feature films or if they are thinking about doing things on youtube? fax young phil makers today have to adopt a multipronged strategy. they would still like to have theatrical releases but they realize the value of youtube and online to get notice. when you are a young filmmaker today, you can get the attention of hollywood without actually going to hollywood or getting an agent or studio behind you. if you can create something that stands out and is original and simultaneously build a social media following, you can get discovered in some ways easier today than when i came up in the business in the 90's. students recognize there are
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multiple ways to get noticed today that they still like the theatrical release. i'm about to go to the sundance film festival tomorrow and i was advising some alums with film and the fest -- with films in the festival that getting distribution at this stage would be great but as a young filmmaker, if you have a film in the festival and it gets you attention and noticed and leads to other movies, that is a win. >> bring your skis. no one is out on the slopes next week anyway. >> in with the new and out with the old. is it the end for tech titans like cisco? we will talk about that next on "bloomberg west." ♪
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>> this is "bloomberg west." i'm cory johnson. music app has raised more than a billion dollars. investors were not named, but the list includes a couple of billionaires. the chairman spoke to bloomberg about whether the company is aiming for an ipo. >> being private gives us so many choices around modifying our strategy. we really do believe it would make an excellent public company , so while we cannot comment on the timing, strengthening the balance sheet gives us more choices about what we would consider going into the public market. >> advancements in open source software mobile and cloud computing new kids on the block
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are giving antiquated hardware a run for the money and we saw the results from ibm last night. my guest is a former cisco chief strategist. as we look at what is going on across enterprise we get these ibm results yesterday and i see them getting all of trying to sell the same old stuff -- hardware, software, services. >> i think we are at a point in time and are still some great names out there. >> giving your lineage. >> there's a point in time right now where there's a set of transformative trends and technology disruptions happening
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setting the scene for the next generation of companies out there. we will be talking about a different set of names and the roots of those changes are happening right now. >> some of the companies are having a success. why is that? i fully expect you to talk your book -- why are the new companies succeeding when the old companies surely can see those trends? >> it is fundamental let some of the older companies need to hold onto their existing business models. if you are trying to go mobile a company that does not have a suite of mobile alex is going to suffer. some of these have been done by younger companies.
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they are willing to go out and build components for that. sometimes, those things are destructive or are painful for incumbents who have a certain profitability model they've built up over the last 20 years. >> let's see some of those categories starting with enterprise security which is when you have focused on a lot. >> security, especially with the sony hack at the end of last year, it's probably one of the biggest themes we are seeing. security has always been a problem or an issue for enterprises, but historically these threats have been burglaries were threats of a credit card. if you look at what happened to sony, that is an ex essential threat that court -- that could have torn the country apart. cyber threats are elevating themselves to the level where they are destructive. >> the very notion of mcafee owned by intel or symantec -- we
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will respond to the newest latest threats, that is what they do. >> the bigger companies will throw a suite of solutions at the problem, but they are not looking at the latest threats that are happening. it opens up an opportunity to look at the new kinds of services that exist. the cloud is another attack surface. since they are not in mobile or the cloud, they don't see them in companies like lookout who are completely focused on the mobile set. >> infrastructure is something you know well from your days at cisco. i have a hard time figuring out which infrastructure companies matter in which ones don't. >> had to look at the underlying themes -- take storage. one of the themes is this space media to flash. it's now becoming an enterprise trend. >> the solid-state drive that
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made the macbook so skinny is happening at the backend. >> these are big storage systems. few companies have taken a big risk -- they say we're going strictly with flash. a few years ago, people would have food that idea, but today they are doing great. there you see the fundamental transformative teams happening. >> and one of the reasons it's happening is the data architecture is changing. you can write to multiple drives so if one fails, you've got it instantly available. >> you have a lot of other benefits, some of the flash technologies which allow it to be cheaper and cooler. in the data architecture side, what you see happening is we have a big problem that we have more data to deal with. orders of magnitude more data.
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managing it is a lot harder and you need a new suite of technology that traditional databases or enterprise data warehouse is cannot keep up with any more. horton works is one of our companies that provides that. >> thank you very much. up next, sports programming for the next generation -- a web video network is collecting investments from people like derek jeter and peyton manning and creating some really cool that he is. -- some really cool videos. ♪
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>> i'm cory johnson and this is "bloomberg west." destination sports clip just raised $20 million. it focuses on the kinds of clips you won't see on espn, like this. [laughter] ♪
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>> you should have seen the outtakes. joining me is the founder and ceo, john west. really? who are showing the clip with a bowling ball curving around the heads of people laying down on the lanes there. who are you trying to attract? >> we focus on young millennial's. this generation between 13 and 34 that have 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 where they are today, which is largely social media platforms. they are increasingly adopting short form the as a primary media content. >> you started this company. what was the inspiration?
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people trying to do media around alternative sports for -- people have been trying to do media around alternative sports decades. >> it's personal. i have three young kids and i sold my company and took some time off and was at home. while i was at home with my young kids, i watched how they were consuming media and it was very different. they did not want to sit back and be broadcast to. they want to lean forward engage in the content and have a social conversation. when we started looking at sports, they had not only the sports -- pro sports heroes and wanted to follow global sports. they had very different media habits and we felt there are 2 billion of them globally and 80 million in the u.s. who are underserved. >> youtube downloads are interesting because it feels like the long tail approach. the notion you can have lots and lots of channels that would
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appeal to varying interests of a big group, even the none of them represent a big group. >> certainly for our demographic, it is about mass in each -- mass niche. there are lots of individual sports that might not get traditional media coverage, but there are fan bases globally that are significant and with digital media and social media, they can only harness them. >> the big issue with that is those partners you've got to get involved in some way -- you have partners in the nfl and age really a small -- they don't want their stuff online for 20 viewers to watch. don't they want to get big licensing fees you can't possibly pay? >> different leagues are at varying points in the progression toward where our
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demographic lives today and part of the value is we've got 13 million subscribers on youtube and the total reach we have is close to 50 million, growing by 2.5 million a week. we are able to take that millennial audience and engage them around traditional sports in a way that is unique i bringing a sports partner to a tent pole event or a facility with pro athletes and provide that authentic view of sports that resonates with this, graphic. >> one of the toughest things for media when it comes to long tail ideas is having things that are high enough quality and low enough cost that you can survive on a channel with a couple of thousand viewers so you can put out a hundred channels or
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whatever you've got. what do you do to make sure this stuff is really good but cheap enough to produce. -- cheap enough to produce? >> the bulk of our content is created by the community on youtube and other social platforms. we are creating about a thousand videos a month on that ecosystem. we have some original content but when you involve the community and creating some of the videos, which is part of the digital dna that's different for digital natives, it is cost effective and the best rises to the top. that's one of the best things about this new way to create media is audiences find the great talent. it's about great entertaining content but our demographic probably defines quality a little differently. >> john west, founder and ceo of whistle sports. now it's time for the bwest
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bite. here to tell us about that number is brad stone. what do you got? >> 77 million. that's the capital raised by the former hulu ceo to start another web video site. it starts today and they are inviting users who signed up on the site -- tell me if you would pay for this. consumers pay $2.99 a month to get a sickly a window to premium content like the great youtube stars. >> i guess it all depends on the content will stop -- all depends on the content. >> it's a great lineup and he has jeff bezos funding and as well. >> you can get the headlines all the time on your phone, on your tablet and on bloomberg.com. thanks for joining us. ♪
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