tv Bloomberg West Bloomberg April 22, 2015 11:00pm-12:01am EDT
emily: live from bloomberg headquarters, welcome to "bloomberg west." we cover innovation, technology, and the future of this. here is a check of headlines. the british trader accused of helping cause that may 2010 flash crash is free. a london judge let him go on the condition that he does not use the internet and lives with his parents. he is also fighting extradition to the united states where he has been charged with 25 -- 26 counts including market manipulation. goldman sachs is seeking $3 billion for infrastructure.
the fund will have a mandate and by a variety of assets including airports, toll roads, and wider networks here it they plan to complete the fund-raising by the end of the quarter. a lot of tech earnings out this afternoon, including ebay. they expect the spinoff of people to be complete in the third quarter. there he meant grew 18% in the third quarter. overall sales grew 4% and shares are rising in after-hours trading. qualcomm is not welling investors with its orderly checkup. they posted it 36% drop in second-quarter profit and says many chinese companies are still not complying with licensing agreements. now to our lead. facebook's first-quarter earnings reports.
for the first time since 2012, facebook did not hit a home run. revenue was up 42% to three and a half billion dollars. profits drop 20%. still, facebook continues to post huge user numbers. monthly active users are 1.14 billion. mobile users are 1.25. shares though, are falling almost down to percent. joining me is cory johnson. the revenue not looking as great, but engagement looking pretty good. guest: get on facebook for the long haul. there is not the same excitement, not the big beats, but if you look at the engagement numbers, all of those numbers are progressing year after year.
if you take the long haul approach to this, that backs do have an impact -- setbacks do have an impact, but there's nothing that concerns a. emily: i sat down with mark zuckerberg in december and talked about the writer -- though broader strategy. take a look at what he said. mark: our strategy is to build things that people really want to use. facebook is the most used app. whatsapp and instagram are the next used. emily: 800 million users for whatsapp. instagram, -- facebook messenger, 600 million users. at what point does facebook not become the core experience? cory: i love the interview.
point number one, i think the dumbbell approaches what we will see. he talked about this at the conference, he said you are going to have mothership's book. and the news feed and experience on the mobile device, that is going to be mother facebook. that may be the principal source of revenues. the experience of facebook and data will come from varied sources like messenger whatsapp, instagram, oculus wednesday. facebook will know a lot about people. even the principal revenue source will be big mother facebook. you can see part of these results -- point number two, i would say is the results they put up today are spectacular. maybe analysts had higher numbers, maybe there is a schematic wall street where they put bigger numbers. but this is just a fantastic quarter. revenues went from two and a half billion dollars a year ago
to $3.5 billion. 49% growth, profitable growth, free cash flow. this is just a blowout fantastic quarter from a company that does all of the things that i company should do. when sales are slowing you have to be sure, but it is still big. 49% if currency was flat year-over-year. emily: zuckerberg certainly doesn't lack ambition. he is taking on even bigger problems in life to connect every person on the planet he has run into a few hurdles. this week in particular in india. some potential partners are not supporting the internet. i want you to take a little -- listen to a little bit more at the interview ended in december where he talks about what he wants to do.
take a listen. mark: we just turned 10. we decided in the next 10 years we want to take on really big challenges in the world like helping everyone get online. emily: how cord you think internet.org is to facebook user and how concerned are you about some of the problems they have run into recently? guest: i think it is good pr. i think the core of what mark zuckerberg one is really that he wants to change the world. facebook obviously fits. but if i were to drink it, it is probably on the list of things that are important it -- if i were to rank it is probably 5th on the list of what is going on. not the whole story. emily: what about mobile? sheryl sandberg says facebook and instagram control one out of every five minutes the user spends on mobile.
guest: it is staggering how investors can spend those progress -- comments. it probably will go higher. that talks about some of the things cory said about that mothership and how profound the platform is. they really just our milking a brand that isn't that exciting. they are doing great just with facebook. that is the real takeaway, they have a continued interest in what is going on facebook, yet they have more relevant ads that have higher pricing driving results. the whole exciting part is imagine what happens when some of his other stuff actually starts to kick in. cory: and what happens when the rmb kicks in -- r and d case in? 30% of their revenues are devoted to rmb -- r&d. they are spending more, $200,000
emily: welcome back to "bloomberg west," i'm emily. an in-depth discussion on cyber threats. i sit down with a retired four-star general. first of attentive headlines. greek banks have received access to more emergency funding. the governing council raised the cap on emergency liquidity of this by 1.6 billion dollars. in the meantime, euro area
finance ministers will feet -- meet to persuade greece to commit to economic reform. new mcdonald's ceo is relaunching a mobile app and remaking its marketing strategy. >> my vision is for mcdonald's to be seen like a modern progressive company, for the contemporary customer experience. it is about doing what it takes to be doing what our customers expect tomorrow. emily: a reported a 33% drop in first-quarter profits and an 11% drop in first-quarter sales. sales of drop six straight quarters in the u.s. boeing says different production costs are rising for it dreamliner. costs rose 3% in the first quarter. they also posted negative free cash flow and a 92% plunge in operating cash flow.
profit in the first quarter actually rose 38%. sales were up about 8%. here in san francisco, nearly 30,000 security experts are in town when he security conference. one of the largest security events in the world. among them, one of the most authorities on cyber security, general keith alexander, a retired four-star general who resigned as nsa commander. he is now the founder and ceo of ironnet, a cyber security and consulting firm. you are famous for being in charge when edward snowden dropped his bombshell. i'm curious, since he stepped down, what has changed in the security landscape? what has surprised you most? guest: what has surprised me is where we are and the rate at
which the cyberattacks and lights are increasing. we have seen over the last year, exports -- exploit against target, home depot, j.p. morgan, the attack against sony. when you look at the changing landscape, threats to companies is growing significantly. part of that is attributed to the rapid change in technology. part of that is the global landscape when you look at what is going on with russia, iran, north korea. terrorism. all of those combined to make this a very tough area. and one where i think, the good parts about these conferences, we need tech companies to come together and grab a better way of addressing these problems. we have not done that yet. everybody's being attacked, the solutions that cyber teams are putting together is insufficient. one of the good things about being here is looking at addressing new ideas, wrestling
with those that other tech companies have seen and how you can partner together to provide a more comprehensive solution. emily: the president of rsa gave a very controversial keynote. he says the security industry has failed. do you agree? guest: i agree mostly with that. the practical reality is we have let security languish on two fronts. technology and the demand for better security. in the past, it has been one we can write over. one did not have to draw from the big boards. i think what happened to target and home depot, everybody said we now look at this as the ceo and board level. it is need that type of change into something that we now need to look at from a tech perspective, let us put the solutions on the table to get a more comprehensive approach to cyber security, that does not put it on the back of the i.t. professionals.
if they are getting hacked it is because they don't have tools and training. it is not because they don't want to protect networks. emily: what is it that you want from tech companies? they say there will never be a backdoor. edward snowden says there has been a backdoor for a long time. guest: what companies need to do is how do you bring integrated approaches? it has nothing to do it back doors. you don't need backdoors or any of that. you need is a way of understanding one malware enters your network how do you do that? in the past it was antivirus solutions. antivirus companies like symantec, antivirus alone is insufficient you need more comprehensive solutions. that brings in a team approach like companies like symantec mcafee and others. also firewall companies.
look at how you can integrate them. i think that is what he was referring to in his speech and what i think we actually need to do. we collect team and cyber on the civilian side, it could present a much better set of products that would help these companies. emily: if the iran nuclear talks well, what can we expect? guest: i'm very concerned that those fail. we had iran and russia. and at times, their way of firing back on sanctions is to use ciber. -- cyber. that i'm concerned it does fail there will be cyber repercussions. there were over 350 distributed denial of service attacks in 2012 and 2013. there are also attacks on saudi arabia in 2012 that destroyed data over 30,000 systems.
if those come together against any of our sectors we have a big problem. even against the government. part one, let's fix the difference. we can do a much better job. take this off the table. i think we need cyber legislation, second. we absolutely need government and industry to share so the government knows when industry is being attacked. going back to backdoors, government cannot see into networks and does not want to see into networks, and does not know when a company like sony is attacked. emily: the ecb documentary on hbo? the takeaways that the government sees literally everything. guest: one of the things you and others can do is get the facts on the table. it is very interesting that we
sat down for the presidential review group. we had a board member of the aclu look at what the nsa does. that was geoffrey stone. we would like to hear his views because what he found his that not only is what nsa was doing was what they were asking -- asked to do, but they were following the law and had great integrity. but that doesn't normally come out. what comes out is somebody sensationalize is it and claims they are in all of your networks. how many networks are out there and how many businesses? santa claus can see every child in the world. that is a nice thought but it is not correct. in the same vein, and other government agencies. the real question is, how do we let government know when a companies under pressure? we have to do that. if it is the government's responsibility to defend company
"bloomberg west," i'm emily chang. we are back with the general keith alexander, her head of the nsa. -- former head of the nsa. you feel the public vastly misunderstands how much information the government has an tracks. what candidacy in terms of my e-mails, my communications? what does the government know about me? guest: about you other than being on bloomberg integrate personality -- and a great personality? if you are talking to terrorists, the government will require more -- a warrant to track your communications. think of a public case, the guide was going to blow up the new york city subway. what nsa had to do under the 702 program, with get a court order to allow them to get information on the communications going from an al qaeda known terrorist with him. that is what nsa and that program is geared towards. nsa is the foreign side of this, not the domestic.
this perception that we are listening to phone calls or reading e-mail is completely false. unless you are talking to a terrorist who is overseas. domestic, it would be the same thing with the fbi. they have to have a warrant or some reason, probable cause, to go after you. emily: what about the dragnet? guest: this is the to 15 program. the metadata program. emily: information you collect right? guest: this is actually business information that the government compels internet services to provide. it has no content. it has the date and duration of the call. only those things. your name is not in there. no content. i will repeat, no names, no content. just numbers. what that is used for is let's
say, there was actually a number in that communication in that public case. fbi told nsa, that is his number and we know he is talking to al qaeda. under the rules at the time, nsa had to have proof to look in the database, that that number was associated with al qaeda. one of 35 people could look into the database and go out to see who he was talking to. they waiver to see one of the people in new york had connections to other terrorists. all they saw was the numbers. the numbers resulted in somebody overseas known to be a terrorist. and if they would give that number to fbi -- an essay would give that number to fbi. the fbi could look that up. nsa's job was to connect guys from 9/11. not to interrupt your communications.
emily: i'm emily chang. this is "bloomberg west," and we are back with retired general keith alexander. founder of iron cyber security. he says the nsa is just connecting the dots. the problem that i think the american public has is the nsa collecting the dots. guest: actually nsa is authorized to get this this is records to play in the database. but they can look at it unless they have reasonable suspicion. and then, every time they look into it and everything they touch is audited, and can be overseen by the courts, the
administration, and a number of places and administration and is reviewed by the presidential review group. they all found that nobody was misusing the data. the real issue, how do we do it better? if there was a better way to protect the country, i'm all for it. i think that is where the tech immunity and government needs work together. emily: at tech communities have insisted they are not going to sacrifice privacy or work with the government. you have larry page and tim cook and mark zuckerberg taking this personally. guest: i would step back and say, what is needed or the country? we need a way to stop terrorist and protect civil liberties. the court found that this is the best approach we could come up with. i put that to the tech community, is there a better solution? can we come up with a better solution? more poorly not only for our country by europe and other countries.
emily: what is your solution? guest: i have not come up with a better one. that is the problem. we have wrestled with this for several years here how do you connect the dots? we could not 9/11. the intel community took a hit for not being able to connect what the nfl i -- and if they thought overseas with the fbi saw here. if there is a better solution we should put it on the table. if you were able to put the best of big data, the company you mentioned, will end apple -- google and apple, why don't they join in and say let us come up with a solution. emily: so are you saying that apple, lugo, facebook can stop the next 9/11? guest: i'm saying that they can protect civil privacy better than what we are doing today.
if they do they would require government and industry to work together. we have a great tech immunity. we have to bring them in. we have to out how do we cross the divide that was created? there is a lot of misinformation out there and we need to fix it. we need people like you to help. emily: you said last year, i'm really concerned something bad is going to happen. i do think evil need to know we are at greater risk and there is a lot more coming. what else could happen? what is something th-- bad? guest: i'm concerned that isis and other terrorists want to hurt our country in europe. it is in their best interest to have a big attack because it helps them recruit more people. we are doing everything we can. by telling the back at how we stopped them only helps them.
think of what happened with enigma and the early parts of the war when the germans went from the third or fourth right we started to lose the war in the atlantic. i'm concerned that the amount of information revealed post edward snowden gives them more information. now is the time for companies to help people protect our privacy. the government cannot do this alone. emily: how concerned are you about another 9/11? guest: i am really concerned. most of my time spent while director was spent on counterterrorism. 99% of my time. i did not have time for anything else. when you think about it, the tools they have, the approach we are taking, and when you see
crowdsourcing and the, is there a way we can actually take these techniques with courts, congress and the administration involved, come up with a better legal foundation for doing that? and a better technical foundation? nobody has put a better process forward. hard as that is because there is a divide because of the technology and government. emily: if we are so vulnerable it there is the power grid is able to be hacked, why has it not happened? guest: look at target, home depot, 70. the statement is just the opposite. there are two sets of companies. those that know they have been hacked and those that don't know. the reality is that they are. the real question is, when does this change from stealing intellectual property and theft to destruction? that is when countries oppose what we are doing in sanctions and other places around the
world. they oppose our foreign policy would their operations -- with their operations and we are not ready for that. we have to address that. emily: you said when. when you put a time frame on it? the next year or two years? guest: it depends on what happens on the geopolitical front. what happens with iran or russia or ukraine. all of these are big shifts in will have an cyber security. and then at least what is happening with isis and others we will tell you what is happening on the terrorism rent. -- front. from my experience in working with the agencies, these are good people trying to protect our country's. they are not active personal information. they are trying to protect you and others. the question is how do we help them do it and do it better? that is what we have to do. emily: former head of the nsa,
retired general keith alexander. thank you so much for being here and being patient and explaining everything. it is great and you back. -- to have you back. from the nsa to be department of justice the agency wants to form cyber security relationships with silicon valley. but are those companies on board? ♪
emily: welcome back to "bloomberg west," i'm emily chang. the cyber security conference allows security companies to showcase their latest anti-hacker technology. it is also becoming a place for government agencies to form new silicon valley partnerships. the homeland security just announced their opening l.a. office -- a satellite office in silicon valley.
the department of justice officials are in town this week meeting with tech giants and entertainment companies following some of this year's against reaches -- breaches. john joins me now to talk to his goals for this discussion. thank you for joining us. you are coming after a long conversation with the former head of the nsa, general keith alexander. tell us what your role is in this cyber security world and what your particular roles are. guest: thank you. at the department of justice i lead the national security division. we were formed to be one place of that department of justice that looks at the polls of risk -- full spectrum of risk. we are also charged with looking at those who would deal information from american companies. spies. so much of what we value has shifted from analog to digital.
spies, terrorists, those who would harm us are seeking to harm us in the cyprus is. -- in cyberspace. part of my job is transforming to meet those needs. emily: who are you meeting with? guest: it's great being out here. many people innovating on the security side here that is an important conversation to have. we are also meeting with small to medium size companies here, entertainment industry, and others. the full spectrum. the message is clear. you need to be prepared for a major cyber incident third part of that preparation has to be coming in and being prepared to talk to law enforcement so we can help you respond. emily: what about companies like apple, google, facebook. general alexander made it clear that the government needs companies to cooperate. they have made it clear they don't want to compromise privacy.
how do you find the balance and convince them? guest: there is a difference of issues depending on the sector. that you are discussing. one of the key threats to american's privacy day in and day out are those crooks and spies that want to steal information. we are seeing companies penetrated by either criminals or nationstates overseas who are stealing information for economic value, and also to cause embarrassment or coercion. the sony attack was a real wake-up call. a message we have been trying to deliver for a while. it does not matter what industry you are in. you are at risk. emily: what are companies doing wrong? guest: information technology issues were confined to i.t. professionals are too long.
the ceos, general counsel, did not understand it at the risk. they thought if you had the right tools, you can block all attacks. you can't. there is no while you can build high enough for deep enough to keep a determined nationstate out of your system. you need to think of this as an area of risk like any other. when neither has been a big push to make sure the cabinet secretaries, deputy secretaries are in the room when we talk about cyber security risk to government systems. too long it was a cio issue. part of its language. we don't know how to talk to each other. when the tides talk to the general counsel who is not in the tech sector, they don't know what you're talking about. we need to learn how to bridge that gap between technical experts and those who understand business risks. emily: one of the biggest risk is their own employees. that is in fact the biggest threat to a company's security. edward snowden was a government
contractor. how likely is that there will be another snowden? guest: absolutely. i'm glad you brought that up. when we talk about the risk to a country, they are still sending traditional spies here. they were looking to use greed or sex or event as a motive to flip people so they could get economic espionage tiered they used traditional spying techniques, loose lips, and they combined that with trying to breach your company through cyber enabled means. if they are able to succeed, the amount of information they can do it fast. the harm they can do is much greater than it was 10 years ago. emily: how do you prevent that? guest: i don't think you can get down to zero on risk, but you have to have a mitigation strategy that the ceo and
general counsel buy in on. you have to make it as hard as possible for these guys who want your system to get what they want. for a long time law firms would put the most sensitive information in a folder called crown jewels. if the bad guy got into your system, they know what to look for. one simple tip would be don't do that. the other thing is anomalous behaviors. employees or digital inside your system. you need to have people actively monitoring and looking for these suspicious behaviors. emily: such a broad and typical landscape for companies to landscape. -- to navigate. thank you so much for joining us and good luck at your meetings. time for a quick check of top headlines.
shares of visa and mastercard surging today on news that the chinese government is planning to and a monopoly on bank card clearing. the new rule takes effect june 1 for credit cards to get a foothold in china's central banks. tesla is signing up big customers like walmart for energy storage. the electric carmaker will make a deeper push beyond its poor business next week, and failing batteries for homes and utilities. a review of california's rebate programs said tesla plans to sell batteries for commercial uses from powering factories to reducing electric bills at schools and wineries. coming up, the documentary making waves, on gender diversity. coming up next. ♪
emily: welcome back. i'm emily chang. there is a serious problem in technology right now when it comes to filling future engineering jobs. a new documentary that made its debut at the phil kessel this -- tribeca film festival this week, seeks to shed light on this very issue. >> students have no exposure to programming. >> computer science should be a
requirement in all public schools. this is a rosy the riveter moment. because the jobs are here and we don't have the workers to fill them. emily: will the film get the attention of tech giants to help get more women into jobs? joining me now to discuss, the film's director and producer. thank you for joining us. this is an important conversation we have been having over the past several years. what is your goal with this film? guest: there is a lot to go, but i would like to inspire change the way women see themselves in the industry, change in the way the startup culture is not so welcoming to women and people of color, and to inspire change in the education system. we have to make computer science mandatory in schools. emily: you have an interesting background because you are not an engineer. you are not involved in technology. how did you come to take on the subject?
guest: i'm a filmmaker. i have a daughter who is studying computer science in college. anybody who have a child in college are looking at job opportunities when you get out of college. seeing what she went through being one of two women in a class of 35 men in an entry-level class, at the same time the wall street journal is talking about it in headlines and different newspapers. if you do not have a computer science education, good luck at getting a job. emily: you have visited several prominent tech country -- tech companies to introduce executives about this issue. did you find any striking differences in attitude? did any companies strike you as more or less diverse or open to these kinds of changes? guest: honestly, everybody is pretty receptive. with the exception of maybe two companies, the doors are wide open to it. we were well received. the most important thing is acknowledging there is a problem.
as it has never started coming out, everybody wants to rectify the situation because everybody realizes that industries across the board will be greatly improved once we improve diversity. emily: tracy is an engineer at pinterst. which companies were not open to you? guest: do i really call them out? there are some tech companies that just don't do that. they just don't want press and don't want to be public. that's ok. we found plenty that did. emily: any of your fears or assumptions confirmed by the film? tracy: yes, i am surprised. sexism is -- what is interesting is it is different than the mad men days. it is not as blatant. now women are talking about micro-aggressions and death by 1000 cuts. actually, look at the case that
just came up, i think it is the ellen pao case. it is harder to prove now. being a woman in tech means you just have to every day go to work and prove you belong in that space. i think the clip we use in the film says, it is exhausting. emily: hopefully your film is part of the solution. a new film this week at the film festival. thank you. i want to get to news just making headlines to google announced a new wireless service plan, something reported for a long time but details are just now being released. brian has that for us. how will this work? brian: the news is finally out. it was like a lot of the reporting has been borne out here. it is going to be a national service in a lot of ways. a lot of 4g areas will be covered. it will work with wi-fi.
you will have a $20 basic monthly fee. you sort of pay extra for data from that. we will see how many people will use that and adopt it. but they're partnering, as reported on t-mobile and sprint. emily: how does this fit into google higher ambitions like google fiber, the google moon project, to win the internet for the people. will we have services like youtube forced on us? brian: it is yet another step to get access everywhere. i think this one is more about what consumers are doing day-to-day with with mobile phones. it gives a lot of great insights. it will be about pushing the industry forward. but yes, it is yet another thing they are doing and we will have to see if it works. emily: thank you so much and thank you for watching this edition. the latest headlines all the