tv Bloomberg West Bloomberg February 24, 2016 11:00pm-12:01am EST
reporter: it is noon here in hong kong. i've update with the top story. foronn will buy the company $6.2 billion. the foxconn bailout was up against the bid inc. j. the decision was sharp. sydney cutting most of its workforce, they world's biggest industry. the job cuts will be completed in july. china's new chief expects a
recovery in the cow. the cow saw a satisfying performance during the the owner new york. those are the headlines. but sick a look at the market. hong kong, china closed for lunch. they are trading for the morning session. this is the picture in singapore, tokyo, mumbai. it is a mixed nature in the asia-pacific. hour ink in half an time for bloomberg west.
announcer: -- growth this lower. reporter: we'll take a deep dive into cloud. we'll analyze apples defense against the fbi. toh-speed internet is coming san francisco for its next fiber project. first up is salesforce. trading higher after has boosted its guidance. better than analysts had predicted. some companies have been hit hard. major tanking last month. hitting investors across the sector. ink issues its first quarterly report of the standalone company.
they are coming in line with analysts estimates. crawford del press is in boston. when you look at those hp numbers what you see? crawford: they had a really tough quarter. from an overall demand standpoint. pcs continue to struggle. for the consumer more than commercial. we saw some real struggle on the printer side. it is really clear that we're just not seeing the kind of secular weakness and not seeing that market recover as we go forward. as you get back into pcs, we are not seeing necessarily a stimulation and demand associated with windows 10. even though microsoft has lit up hundreds of millions of desktops. and notebooks. we're seeing a relatively weak demand in both consumer and commercial.
corey: if you look at those printer numbers you can see the decline in printing getting worse a double-digit decline in the printing business. certainly hurt by currency. that helps the japanese competitors where they can sell stuff for less. it hurts hp, it is more expensive around the world. the ceo said to me i expect that to be the new normal. it is the way this environment is going to work for the foreseeable future. in my mind hope is not a strategy. do you see within this signs of any kind of a turnaround? crawford: they are really defending their business as best they can. hp pours a tremendous amount of innovation into print. it is not going to go away but
it is going to continue to decline for a while. on the pc side, they are defending their number one position. they have streamlined their product line. on the commercial side they will continue to fight it out. over the long term this business will stabilize. you saw him say was they are taking immediate action. they're cutting expenses. they have to in a weak demand environment. corey: the never-ending restructuring of hewlett-packard that goes all the way back to 2001 is continuing. he said we will accelerate our restructuring. adding 3000 people into the year. the restructuring never ends at this company. crawford: you'll see this going forward until they can find a bottom with respect to demand. corey: at salesforce slowing growth.
the really strong growth for really big company. >> 26% to deferred revenue. that was a key highlight. this company continues to grow at mid 20's. everyone thinks it is slowing. but the backlog growth is about $11.5 billion. that is a phenomenal number. it was a godzilla quarter. relative to tableau and linkedin. when you look at mid 20% growth and improving operating margins and subscriptions going lower. when i look at the clouds that they are giving birth to. some of them are growing bigger. it is still drawing double digits. they signed two nine figure transactions, with state farm and another big as i company.
-- s i company. multiple ceo level decisions making platform decisions across the board. not just to run sales and service for custom applications. this is hitting every employee in the company for salesforce. not just what oracle can handle. they are heading across the platform. corey: i am alone in my concern about their marketing expenses. over 50% of sales spent on marketing. those are huge numbers. i wonder if it is over $3 billion. as a percentage of sales there is no other company that comes close to spending as much to promote its sales. brent: it is a fair criticism but as long as they keep driving the rate they are able continue to spend. when they see a slowdown they are committed to wall street
that they will slow down and that operating margin will decline. corey: to my mind marketing expenses is how much you want to put the pedal to the metal. they are drinking the red bull and it is working. as long as it continues to work they will let it run through a steady out margins. the minute that it dries up. they will at the margin go up. it is not pretty but it is -- it has worked. the guardrails here are cios love their approach. it is not the old microsoft approach of here's $10 million in some software good luck. we think they have the right people. they have just raised prices by
more than 10%. the first time ever. that is still something investors have to look forward to. as that rolls through these renewals. it is tough to pull any big holes in the story right now. corey: always appreciate your thoughts on this company. coming up, the battle between apple and the u.s. government. should code be protected under the first amendment? it is a very interesting topic. plus a look at virtual reality. a film studio producing ai content. ♪
♪ corey: blackberry building on the consultancy business. set against hackers to acquire the u.k. firm. encryption. they are not saying how much they paid for the company. the deal has the potential for a new source of revenue for a company that needs it. the ceo is shifting the company from relying on smartphone sales. on to the ongoing encryption debate. apple fighting a government order to unlock an iphone that was used by one of the san bernardino shooters. apple ceo tim cook explains why he believes he is doing the right thing. tim cook: we know that doing this could expose people to incredible vulnerabilities.
this is not something that we would create. this would be bad for america. it would also set a precedent that i believe many people in america would be offended by. when you think about those which are known, compared to something that might be there, i believe we are making the right choice. corey: the full interview airs on abc world news tonight. apple expected to argue in federal court that code should be protected as speech. on wednesday, attorney general loretta lynch defended the government's stance. she said if the government needs the assistance of third parties to make sure that a search was actually conducted those parties must assist if it is reasonably
within their powers to do so. the battle between apple and the justice department sparks a larger debate with congress. should they be with access encrypted communications? jeff smith holds 20 patents in this field. has the government picked this case as the beginning of many cases? >> i do think the government was looking for a case. a poster child for an image an issue that has been simmering for the last several months.
when the paris attacks came along government officials were quickly out the door saying that technology companies had blamed the attack. it had been piling on over the last several months. then san bernardino came along. the government has seen this as being a case where they have some sympathetic facts on their side. they're trying to drag the technology industry into a public battle over this. corey: how do you look at this? it is an unfortunate situation. government is potentially going to create a big problem. introducing a new weapon for terrorists to use against our country. i think they are rushing to make a decision here seems mercurial to me. i wonder if they should take a step back and allow all of us to assess what is going on. perhaps revisit some of the assumptions they are making that
are flawed. corey: even as we're talking right now. the ceo of verizon sent out a statement jumping into the fray saying they support strong encryption with no backdoors. they are committed to consumer privacy. they say the case with apple involves some unique issues. it should not be addressed in an ad hoc basis. supporting apples contention that congress should look into what the rules of the road are. i wonder if the framers didn't decide this when they made this a first amendment issue. very interesting to frame this as code as free speech. jeff: it is one of the most powerful arguments the technology industry can make right now. the government cannot compel the company to write software. companies have a free-speech right in their software.
that is an arguments that the tech industry will have on its side. the government was looking for a case that they can bring to the forefront. i would just say technologies companies are trying to say we need to get this out of the courts right now and let's take it congress. be careful what you ask for because congress is not always sympathetic to the tech companies either. corey: a fair point. jeff: i do think the tech industry is on apple's side. i developed some of the standards that we used to encrypt e-mail. these are some of the software systems my company built. some of the standards that exist today. i can tell you what the fbi's asking apple to do is a mistake. -- it is not going to make us safer.
it will create a key that we assume is only going to be protected by the government but once we create that key which doesn't exist today. we won't know where it goes. they are offering up a new precedent as it relates to how companies behave or even how we as citizens express ourselves through speech. it is one thing for the government to be prescriptive and tell us what we can't say and what we can't do. it is something altogether different for the government to come in and tell us what we must say. how would bloomberg feel if we came in the government came in and said here's the story we want you to write. this software at apple does not exist. apple has tried to help the government access this information. now the government is telling them to build a new version of the software that would unlock 700 million iphones across the world. it is a bad idea. corey: do you think they could even build the software? jeff: i suspect they can.
it is just taking down the guard that is preventing a group force attack. it does not exist today and there's a reason they haven't built it. corey: thank you very much. siri may finally be coming to the mac. apple will use a major operating system upgrade to expand across all of the product lines. it made its they at the -- debut at the developer conference. of all the cities that might need an internet upgrade san francisco could be next in line for the ultrafast google fiber. everything else is a little different in san francisco, so why not?
♪ corey: the nike cofounder is giving $400 million to stanford. it is one of the biggest gift ever given to any diversity. it will be modeled on the road odes scholarships. on thursday the eu has been investigating google for monopolistic practices. it claims that it diverted traffic away from its rivals to google. google could face billions of dollars in fines if it is found to have violated the european antitrust rules. the ultrafast fiber service will be here in the silicon valley area, some parts of san francisco. a lot of san francisco is weird. it would be built on existing fiber that already exist. -- existing in the city. jack, i was in provo about a year ago.
it already has fiber in unprofitable system that google decided to take over and run. what are they doing here? jack: they're taking fiber from a bunch of unnamed providers. that is somewhat different from what they've done in provo and huntsville, alabama. where they have gone to municipal fiber and see if they can tap into that. this is a way to bring that cost down. they don't have to know that infrastructure. they can tap into the one that exists. you don't get everywhere covered. they haven't disclosed that. given how crazy san francisco rents are, we don't know. i live on the east bay. we're talking about one gigabyte so that is 10 times faster than you will get in most places. 20 to 30 times faster based on
the actual speeds based on their traditional provider. they are rolling this out for a -- really slowly. they are starting to ramp it up. google at first wants to do fiber as a way to set an example to places like at&t and comcast. have him reduce prices and up speeds. they are trying to turn it into more of a big business in itself. >> they do generate revenue from this. around $400 million in the most recent year. quarks -- >> much of it is making what we don't know yet. >> when you look at how much comcast earns or at&t, there is
money to be made from selling the internet. corey: it is a very different kind of business model than the google business model. jack: renting it from someone else rather than laying down the cable yourself. corey: thank you, jack. deep mind technologies is pushing into medical technology. they have created a software called streams. it allows doctors to see medical results faster. this is a very different kind of business. jack: it is an early pilot project. it will not make money right now. i am an english person i have been to the nhs a lot. it runs off pen and paper. they're just trying to bring some software techniques into
british health care. corey: it feels like this is an announcement to kick the shins of ibm. jack: it is a statement of intent. they've hired 15 people and a couple of doctors. a lot less than ibm has in its watson division. google is famous for doing good technology very quickly. with relatively few resources compared to traditional tech companies. they got fields of computers. corey: coming up, hollywood animated blockbusters coming to the world of virtual reality. i will be joined by the director of the madagascar films. he has started a virtual reality studio. bloomberg is on the radio. more from bloomberg west after this. ♪
reporter: ivan update top stories. foxconn is going to buy a sharp. to billion dollars. the bid was up against japanese government-backed inc. j. the government still has high hopes for sharp's future growth. decision ultimately laid with sharp. galaxy entertainment fell less than expected. galaxy posted earnings of $322 million.
down 7% from a year earlier. the company's broadway project help boost sales. billions inends france. is expecting to invest in paris. he plans to announce a major deal. speaking of football, fee for -- but reducends their suspensions from eight to six years. delegates from world soccer, are in zurich to pick the next president. those of the president -- headlines from bloomberg news.
we will check in on how the markets have been trading. reporter: take a look at what is going on. a mixed picture at shanghai stocks. we are in the middle of the lunch break right now. profit is taking place. we have a pretty good run up after the lunar new year. we did see the money market rate search. that is jumped in a month. just for the thinner new year. lunar newfore the year. sharp is rising seven and a half. -- was rising 5% and then fell back 7%. multiple reports came in on the possible bid. we also got reports that the government was going to be pushing its watch it.
that is really helping construction and real estate stocks today. we will reopen in at the top of the hour. ♪ virtual reality has taken certain -- centerstage. security tourism even the workplace, this is what he had to say about the numbers so far. >> even justin veer vr -- even -- even just in gear vr, there have been many hours of 360 video being watched. that will be one part of the content ecosystem for virtual
reality. cory: content ecosystem. eric darnell knows some thing about that. he has been making animation specifically designed for the immersive experience. tell us what you are doing. it is so fascinating. >> our approach is to do entertainment content. narrative, character driven. it is not games. we think there will be a great opportunity for storytelling. cory: the way that movies work is to sit the viewer down and have them have an experience. things rush toward them and see things happen. but you have a captive viewer. virtual reality is the opposite where the viewer guides things. how do you tell a narrative when you cannot control the viewer?
>> they can look anywhere. that is one of the beauties of the art. cory: or real-life. >> exactly. you can explore. as a director i encourage or inspire the viewer to compose certain shots. you can do that with sound or a character going, what is that? and you want to see what they are seeing. there are a lot of ways to see the pace could have the viewer look at clouds roll by. cory: i was thinking of the example where you're in a movie theater and you see something like an object crash toward you or role in your direction. you're sitting in her seat and -- in your seat and cannot get out of the way. in vr, you would get out of the way. maybe? >> you're right. it is such an immersive experience that even though you know it is not real, something in your reptile brain in the back says get out of there.
cory: is that what is back there? reptile brain? >> it is. cory: that explain a lot in my life. >> but your brain can say that's not real that is fake. cory: some are saying people cannot take too much vr. it is too much stimulation and exhausting. what do you think the right duration is for this immersive storytelling? >> i think that the duration depends on two things. what is the content? if you're doing a point-and-shoot game you could get physically nauseous because your inner ear and eyes are giving a brain different information. there are those challenges that make it difficult. if it's a more benign situation, you can last longer.
as we learn more about the language, we can eliminate more of those strains. cory: we just showed three major platforms. oculus rift, cardboard. then the sony playstation vr. a lot of people are waiting to see what that will be. >> some of the high-end equipment is amazing. i am most excited about the user-friendly market. cory: you like cardboard? >> that for me is the way to get the most eyeballs. to turn the world on to what vr has to offer. you can have a really cool experience.
cory: can you tell me about the story? >> the story "invasion" is about aliens that come from another planet with advanced technology. cory: this is fiction? >> it is inspired by a true story with things happening today in the world. they come to the earth and the earthlings rise up. in our story, the main character is this cute bunny who is responsible for sending them packing. cory: the bunny's name? >> bunny. cory: that's clever. >> when you look down, you are a bunny too. you and your bunny friends take on these aliens and save the planet. cory: that is interesting. how long is it? >> five minutes when it is all
said and done. cory: how expensive is it to develop something like this? >> this is probably one of the more expensive things. we are focused on the high-end feature animation quality work. we really feel it is important to engage the viewer, to have that quality of importance. -- of performance in the character. cory: how do you get paid for this? >> i don't -- do you have ideas? cory: i've got 20 bucks. i'm happy to help out. seriously, how much will it cost? >> this could cost hundreds of thousands of dollars to create. we will see what the business model ends up being. what the distribution models are. cory: that is so silicon valley of you. >> we will see what the market is and at the end we will stand on a pile of great things that makes us a leader. cory: build it and they will come? >> we will try that. cory: baobab? what is that.
>> it was a tree that grew in africa. julian lived. we also did some market testing and that was the most memorable then we could come up with. cory: i like the idea of baobab studios. beyond vr, a new video from google dynamics. this robot is 5'9", 180 pounds. look at this thing. walking through difficult situations like snow, picking up boxes. picking itself up if you knock it down. they have primarily worked for the military but we have yet to see if there are consumer applications. help around the house.
♪ cory: stripes is now in the business of helping startups get off the ground. the platform lets founders across the globe sidestep some of the hurdles with incorporating businesses in the states. carolyn spoke with the ceo about atlas. >> we look at our user base and the potential audience and what
people were doing around the world. strike support businesses in 24 countries. largely in north america, western european in asia. we thought that really only covers half of all the developers. there are more and more people are learning to code in emerging markets. how can we take those 170 countries and give them eight straightforward way to start their company. cory: what about concerns of weeding out companies that are not what they said it are? he explains. >> we are just making the recipe available today.
silicon valley banks and our banking partner. we will be doing fully standard background checks that they have been doing it for years. it is going to be more secure and better vetted. braintree is doing deals with uber and airbnb. cory: stripes going after the same customers as airbnb? listen to what they have to say. >> we are not focused on existing businesses. we are focusing on new customers -- newcomers that can be enabled. about 2% of consumer spending takes place on the internet today. it is our belief that 2% will be much larger over time. 10%, 20%, 50%. whatever the terminal figure is, it will be more than 2%.
our focus is very much on what is and what is not happening in inefficient ways. what businesses are not getting started. cory: that was patrick collison, ceo and cofounder in barcelona. picture facebook in your mind, you are probably seeing the like button. you can like, love, laugh, or be wowed, but there is still no dislike button. sarah frier is our bloomberg reporter. why are they finally doing this? sarah does not like me apparently, because she cannot hear me. sometimes we can love sarah frier, she will hear about that later. coming up, we will talk about
♪ cory: china's biggest ride hailing company is seeking fundraising to raise a lot of money, perhaps as much as $1 billion. the round is said to be oversubscribed and the terms yet to be finalized. rival, uber is heating up with a motorbike ride service in bangkok. it could be a smart way to skirt gridlocked traffic. the grab ride hailing app is the
leader in most of asia. -- southeast asia. the wind business is soaring. despite really low oil prices, record low oil prices. demand for clean energy is not slowing down. wind installations at market valuing doubling. we are joined by bloomberg news analyst amy grays. this is interesting to me. you would think that when gas prices are at bottom levels, oil prices hovering around $30 per barrel, the appeal of expensive wind and solar projects are doing fantastic. that is right. >> low oil prices is not holding back clean energy investment. there was about $110 billion invested over the year.
half of theed about total capacity for wind which is roughly speaking the entire generating capacity of the country of argentina. cory: what is china doing? wind and solar. is that happening in china? >> it is all policy driven. the government has a fixed price for the wind power that the developers sell into the grid and last year they announced that they will ratchet back those tariffs. developers essentially surged into the market to build as much capacity as they could. it doesn't mean it will die, it means they're going from something like ludicrous mode to fast mode. cory: ludicrous mode. i like that. in the u.s., i read warren buffett's annual letter and he talks about the big push they have made in wind. who are the leaders in the u.s.?
>> mid-american is one of the big developers. next air are the biggest. a lot of european utilities like eon, edf, edpr are big wind developers. cory: in the u.s. how do the subsidies work -- wind developers in the u.s.. cory: how do the subsidies work? are they all the same? >> not the same at all. we just extended a subsidy by five years. we usually get a two-year extension. that was unexpected and great for demand. in many markets like europe, there are feed in tariffs, or premiums paid on wholesale price. in brazil, there are auctions. they have reverse auctions where the lowest bidder gets the contract.
that has pushed prices down to some exceptionally low levels. in peru, there was an offer of $37 per watt hour. cory: the turbine manufacturers are making money here? >> they had a good year. this year will be flat in terms of demand. for 2016-2017 demand will be about the same. it will be a very good year. china will have a slowdown that will impact the chinese manufacturers. very few chinese manufacturers are able to export their turbines outside of china. less than 1% of chinese sales are outside china. cory: why is that?
>> the chinese market is strong and easy to sell into. in developed markets like europe and the u.s., chinese manufacturers have tried to come in, but you are making a multimillion dollar commitment to a turbine that does not have operational experience in the u.s. market. plus access to things like spare parts or if the company goes bankrupt, where do you get those spare parts? who do you go to offer warranty -- who do you go to for warranty? cory: cool stuff. amy grace is our bloomberg news wind energy finance specialist. think you for joining us. the new york times is reporting that apple engineers have begun developing new security measures which would make it possible for the government to break into locked iphones. sources say that, if apple succeeds, it would significantly
increase the challenge for law enforcement. some experts say that the only way out of this back-and-forth is for congress to get involved. it is our time to find out who may be having the best day ever. woody allen. amazon studios just bought his untitled film for $50 million. that it -- for $15 million. that is three times what sony paid for his last film. that does it for this edition of bloomberg west. tomorrow, don't miss the coo of yahoo! ♪ .