tv Bloomberg West Bloomberg April 15, 2016 11:00pm-12:01am EDT
mark: you are watching "bloomberg west." for the second time in as many days, southern japan has been hit by a powerful earthquake. the magnitude 7.2 quake struck the same region as the one which struck friday and killed 10 people. no word if the latest quake increased the death toll. secretary kerry called the russian foreign secretary and officially objected to russian planes flying close to a navy destroyer, calling the move unsafe and unprofessional, but a russian military spokesman says the pilots were using all measures of precaution. a group of 20 nations are
threatening to penalize tax havens that do not share information on their clients. boston is marking the third anniversary of the deadly 2013 marathon bombings. the governor and mayor joined survivors and victims' families for a wreath laying ceremony on boylston street. the city observed a moment of silence. global news, 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. "bloomberg west" is next. ♪ emily: this is "bloomberg west."
coming up, apple pushing hard against a court order asking the company to unlock another iphone. we will bring you all the details. plus, is the future of net neutrality under threat? we look at a new bill making its way through congress and what the new rules could mean. and japan rocked by the second powerful quake in 24 hours. we will check out what the rest of the world is doing to catch up. first, to our lead. another tug in the tug-of-war between apple and the fbi over encryption. the cupertino company refusing once again to help investigators hack into a phone, reiterating its court case. they reiterated the government's need to substantiate its need for apple's assistance alone -- provides more than sufficient grounds to deny the government's application.
the judge sided with apple. what does this mean? >> this is the next round in a debate or fight which is going to go on for a long time. apple's point is fundamentally that this phone is running an older operating system than the one in the san bernadino case. if the government could hack into that one, why can they not hack into this one? emily: exactly. why can they not get in? >> the one slight difference is this is an iphone 5s, and the one in san bernadino was a 5c. it has slightly different hardware and security measures. i'm no hacker. i do not know exactly what might be possible. potentially, that might be the fbi's defense. we do not know.
that is the heart of apple's argument. emily: and this iphone is involved in a drug deal or narcotics case? >> the individual at the heart of the case, while it has not been closed yet, has pled guilty. the argument of the fbi is that it will help them investigate further. emily: interesting. we will talk about this a little more with you later in the show, but thanks for that update. the house of representatives passing a bill that would stop the government from being able to regulate how much we pay for internet service. this is a measure that would overturn net neutrality, a principal the tech industry has fought to protect. net neutrality makes it illegal for companies providing internet service to favor or block one type of internet traffic over the next.
for more on the latest developments in this case, i want to bring in our bloomberg news reporter from l.a. lay out how what happened today changes the battleground for net neutrality going forward. lucas: it does not change anything immediately. if you remember from civics when you were in middle school, the senate would have to pass this bill. it has to go through both houses, and the president would have to approve it as well. president obama has voiced some opposition to it. it is possible that he could veto it. if it were to get through, it would mean -- the concern on the part of a lot of the tech companies you mentioned like netflix that are against it, that the rate could be defined really broadly, that the fcc would not just lose the ability to set rates for broadband
providers in the traditional sense, but that it would lose a lot of regulatory abilities. emily: the president also today threw weight behind the idea that consumers can buy cable boxes from anyone they want. they do not have to get them from cable companies. this is something cable companies have then fighting for a really long time. explain how this undermines cable providers. lucas: if you think about how you subscribe to cable now, they deliver you a box, and you have to pay a monthly fee, and you have to give them back the box when you are done. instead, you could just buy a box, and that is how you get your tv. comcast or time warner lose control over the box and no longer get control over those fees. it opens the playing field for someone like apple, amazon, youtube -- or google, i should say, who not only sell their own
versions of boxes but also have been flirting with creating live tv services. emily: thanks for joining us. i do want to continue this conversation. i think sometimes people's eyes glaze over when they hear the term net neutrality, but can you lay out for us once again -- why is this so important? how it affects consumers and businesses involved. >> the basic idea is an internet service provider cannot show favoritism to one website over another -- basically, all traffic would have to be given equal treatment on the internet. emily: how would that impact me as a consumer? singer: it impacts you in that you do not want your service provider to play favorites. if you have a preferred website
for, say, gaming, you do not want your internet service provider to be giving your favorite website dis-favorable treatment in relation to its own. emily: this is something the tech industry has very much supported. a change in net neutrality could drastically impact a company like netflix, for example, but at the same time all this work is being done in the obama administration, could this all be overturned by a republican administration? >> yeah, that is the interesting thing. all of this is coming to a head right when one presidential term is ending and another will begin. i would be curious to ask hal -- it feels like one connecting thread between this bill that is pending in congress and the set-top box issue is the cable and telecom companies have fought net neutrality rules and this set-top box rule change
very hard, and we thought those guys were on the outs in d.c. they had lost favor, lost power -- and i wonder if they are fighting against these latest moves, re-flexing their muscles in d.c. emily: hal? singer: let's start with the set-top box proposal, for example. it would be an attack on cable providers and telephone providers offering video service. they have to pay a lot for programming rights to distribute over their wires. the google proposal would allow google to basically get this content for free and repackage and resell it, so of course they are crying foul. google could compete on the same terms if they wanted to. in fact, they do in certain cities, but that requires great capital expense.
they have to dig up cities, lay the wires, buy the content, and. alternatively, they could compete like netflix or hbo, but again, that requires creativity. you have to design your own original programming. so they come up with a third way, which is ask their friends at the fcc to let them get in between cable operators and content providers so they can basically resell this content as a third and even superior strategy, in their mind, for free. emily: what do you make of the argument that it will take a long time for cable boxes to roll out and ultimately, does it even matter? singer: it will not have an effect on video prices. it probably will not have much of an effect on set-top boxes.
consumers are finding other ways to bring video into their homes. emily: we have to leave it there, but of course, this is an issue we will continue to cover and obviously a very important one. our bloomberg gadfly columnist is sticking with us. all bids due for yahoo! on monday. how many suitors are really interested interested in yahoo!? -- we will take a look. ♪
salvage her legacy. >> yahoo! ceo marissa mayer is at a crossroads. she can sell her company now for whatever money she can get or roll the dice on a revival strategy. finding a buyer may be her best chance to salvage her legacy. yahoo's stock price alone might suggest she has been a success. the shares traded at less than $16 when she took over in 2012 and then reached a high of $52 in 2014 before settling at about $37 in april, but that bump stems from smart investments yahoo! made in two popular asian companies long before she was hired. the reality is yahoo! has become unprofitable and its outlook is only getting worse. its financial troubles have sparked fierce debate about how much the company is worth. yahoo! is made up of three parts
-- its asian investments in alibaba and yahoo! japan, . -- and its maynard webb business. web business. depending on tricky value assumptions, the asian investments made be worth more than the company as a whole, which means investors could be valuing yahoo's web business at less than zero. time is of the essence. its online audience and especially its mobile audience is not growing. in short, nothing that marissa mayer has done has worked. for a dose of courage, she can take a lesson from her former colleague, tim armstrong, who was struggling as aol ceo. then he got an offer to sell the company for a 23% markup. the sale made him look like a genius, and now, he is helping lead verizon's bid for yahoo!.
she could hop aboard the same liferaft that saved him. emily: monday is the deadline for all the bidders who want to throw their hat into the ring. potential suitors include the daily mail, verizon, and private equity funds like tpg. we had heard there could be as many as 40 companies looking, but obviously, the number of actual bids will be much smaller than that. how many do you think will come forward? >> there are people who kick tires, and that's what you do when a house is for sale or a company is for sale. when it comes time to put in bids, there will be a small number. verizon has made no secret that they are interested in buying yahoo!'s web business.
emily: verizon expressed early on that they were interested, and they do not seem to have wavered. i spoke to arianna huffington, and she said she would absolutely like to see yahoo! in the family and believes that verizon does have a long-term strategy that includes yahoo! and the huffington post. listen to what she told me. huffington: yahoo! is a hybrid, a journalistic enterprise, and a platform, and it owns tumblr, which i think is a great asset. as more and more people want to express their views in more than 140 characters, you have an incredible opportunity to use
tumblr to allow people to express their views. we see this is for us one of the most important monetization channels. emily: yahoo! is not the only major tech player to report earnings next week. do you know if we will hear about this on the earnings call? ovide: i cannot imagine they will say anything specific on the earnings call about the number of bidders or if the company will be sold or kept intact or whatever. it's hard to imagine they would say anything like that. emily: how long does the process take? ovide: it's really unclear. the clock is ticking a little bit because they are staring at
a shareholder meeting sometime in june or july where an activist shareholder is trying to throw out the entire board. you can imagine a scenario where the board changes and the new board have new ideas about what to do with yahoo!. would they force a change in the company strategy as an independent company? right now, if i were in yahoo!'s shoes, i might be looking to accelerate a sale and make sure it happens before that meeting because who knows what what happens after that. emily: yahoo! will be kicking off tech earnings season. we will be looking at domestic subscriber growth, which has been slowing down, and they are trying to double it. as we know, netflix is spending billions of dollars on original content, on expansion, and nobody knows when that will start paying off. what are you watching?
ovide: i'm watching two things -- international growth is the priority for netflix this year. it will be interesting to look at the number of customers they added abroad. remember, that very expensive. customers in new countries are losing money outside the united states. at the same time, they are having trouble signing up people inside the united states, so i will be watching that, too. the number of net new subscribers in the u.s. is expected to be the smallest since 2012. they are spending lots of money to expand abroad, and at the same time, the profitable part of the company is not growing, and that makes it a pretty tricky position for netflix to be in. emily: we will be watching that next week. just a reminder, you can always find more gadfly insight on the terminal from bloomberg.
emily: fitbit is on a quest to become more than a consumer brand. its next step -- turning into a digital health company. the company already faces a lawsuit over heart monitoring. could this venture bring on additional scrutiny with the fda? our bloomberg senior research analyst joins us to talk about it. fitbit has a number of different uses -- diabetes monitoring, weight monitoring.
er doctors are using it to check heart rate history. do they really have the clinical technology or clinical edge on other companies that could make this transition to a health monitoring company actually happen? >> if it is common use cases of monitoring, they would compete with other technologies already available, but if they are targeting niche markets, just because they have this advantage, also targeting -- maybe we have been looking at niche markets like the medicare population and so forth where they might find applications just developed for that. emily: we recently spoke with the ceo of fitbit, james park. listen to what he had to say. park: we are not just a wearables company. we are a digital health company, focused on helping people achieve their goals.
our product roadmap is filled with the devices, both wearable and non-wearable, that help people address those goals. emily: does it seem like fitbit is best positioned to do something like this, more so than, say, apple, which has the apple watch? ovide: it does feel like a big step up from going to this toy people use to confirm how lazy we are to being a health care product. i imagine that takes a number of years to get accurate enough where you actually can be used in clinical or health care settings, and you are right that apple talks about the apple watch in almost exactly the same way -- as something that prevents disease or tracks your heart rate for your physician or that monitors glucose levels. it seems like all these wearable companies are moving in that direction where i imagine there's more money than there is
in the kind of step-counting toy category. emily: they ultimately want to sell their technology to the medical industry. at the same time, there's a lawsuit that says heart monitoring information is wildly inaccurate. in some cases wrong by as much as 75 beats per minute. >> you have to get better if you want to take medical devices seriously, but i was having a conversation where they said scrutiny is relatively less than that of something more life-dependent. relatively, it will be less than those things, but from where they are right now, they will have to step up their game. emily: thanks so much.
>> i'm mark crumpton. you're watching "bloomberg west." rescue crews are searching for survivors of japan's second powerful earthquake in 24 hours. saturday's magnitude 7.3 quake struck in the early morning hours in the same region as the one on friday. the nuclear plant near the epicenter of both quakes is operating normally. belgium's transport minister has resigned after the leak of the secret eu report detailing lapses in airport security oversight after the bombings in brussels. the confidential document says security measures were flawed and safety checks were handled poorly. spain's industry minister also resigned today, the latest top
official to leave his post as a result of the so-called panama papers leak. soria stepped down after giving conflicting explanation of his ties to a firm set up by mossack fonseca. democratic presidential candidate bernie sanders attended a vatican conference in rome today, commemorating the anniversary of a land march teaching document from john paul ii. senator sanders: i am very excited to be here at the vatican, to have the opportunity to say a few words to the academy about the need for a moral economy. mark: senator sanders did not meet with pope francis. his trip came just four days before the new york primary.
republican presidential candidate ted cruz discussed his strategy for winning the nomination and healing the divide within the gop. senator cruz: i will say, if it ends up as a contested convention, that we are in a majority. it is going to be critically important to keep the donald trump supporters energized and engaged. mark: the republicans hold their primary in new york next week. the lower chamber of brazil's congress is debating possible impeachment of their president. lawmakers batching impeachment say the administration violated fiscal rules to shore up public support. hundreds of cabbies set up roadblocks in osiris to protest
-- in buenos aires to protest uber. the cabbies' opposition has picked up support. global news 24 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world. from bloomberg world headquarters in new york, i'm mark crumpton. ♪ emily: apple shares falling on news that the company will continue with its estimated 30% cut in iphone production. the stock closed 2% lower in friday trade. slower than expected sales are the culprit for the reduced orders according to the nikkei asian review. back with me, alex webb, and new york, my guest host, bloomberg gadfly columnist shira ovide. talk about these production cuts, alex. how serious is this? alex: we should clarify, we don't have the sources of the nikkei asian review. i don't have an idea of the credibility of it.
but it indicates a broader trend. if this is a longer-term return that replacement cycles are lengthening, that has implications for the industry. by the same token, we know there's going to be another iphone come autumn. i've got an iphone 6. am i going to buy a 6 plus now? emily: is it more pronounced this year than last? alex: we have to see when the earnings come. apple did warn that sales were going to decline for the first time in a decade. emily: shira, apple is in an interesting position with hardware sales expected to decline. they are trying to beef up revenue from other things like services. shira: apple has been stressing, look at how much money we make,
$20 billion in revenue in the last year from things like their share of app store downloads, music subscriptions, things like that. but let's not kid ourselves. apple, two thirds of the company's revenue comes from the iphone. this is a hardware company. emily: interesting. you guys talked about how they might make changes to the app store ranking and turn that into revenue. alex: we are hearing they are pursuing kind of google-like solutions, whereby you as an app developer could pay to have your product ranked more highly in the app store. that could be a huge moneymaker. emily: i want to talk more about the encryption and privacy fight. apple continuing its fight in a brooklyn court case, urging the judge to uphold the denial of an iphone warrant. this is the second time in a
week we've seen a tech power player digging in its heels when it comes to the government and access of data. microsoft filed a suit to block authorities from taking customers' data stored in the cloud. joining us, hillary night, and former outside counsel to microsoft. microsoft is saying, the government is asking us for more data because everything is moving online. at the same time, they are asking us not to tell our customers, to keep it a secret. what is your take here? hillary: it is like government gone wild. i think that is the message microsoft is trying to make in its lawsuit, that there are limits to what the government can and should do, and relying on laws from the 1980's is not the best way to protect the interests of the technology industry and the consumer. emily: at the same time the government says, if people knew we were poking around, they could just delete all the data.
should investigations be able to go on without telling the people involved for security reasons? hillary: i don't think microsoft is challenging the law enforcement ability to probe into data lawfully. i think what they are challenging is the right to be able to communicate with their consumers over a period of time. a lot of these warrants have what i would call a gag order which says that microsoft cannot inform the consumer that this sort of data mining is happening, and those gag orders have sort of this indefinite lifespan. as microsoft, you've got, i don't know, 2000, 3000 warrants, and of those, at least half have an indefinite gag order. that creates so much tension in this ecosystem of trust you are trying to create with the consumer.
emily: the microsoft case is very different from the apple cases, but what you see as the role of microsoft and apple in defining the next decade of cyber law? hillery: very good question. i think in some ways, they are pushing congress to move forward. that is what needs to happen. this law that microsoft is challenging came out in 1986. this will disclose my age. i recall 1986, getting music cds and disposable cameras, and that was the extent of technology. whenever you've got outdated laws and emerging technologies, you are going to get some sort of result that is not what the original drafters of the legislation intended and not something that can be sustained if we are going to keep our rights under the constitution, balance them with predictability
in the technology space, and also have relationships with consumers that makes sense. emily: 1986, decades before the cloud. hillery nye, alex webb, and shira ovide is sticking with me. coming up, arianna huffington opens up about how the ceo built his uber empire and how it is hurting donald trump. our interview, next. ♪
silicon valley's cutthroat culture and how companies should balance work, life, and sleep. arianna: all the evidence is to the contrary, that in order to be at your most productive, you need to be, to have had a good night sleep. that is when you operate at your best. i was talking to travis today. emily: travis kalanick of uber. arianna: he said he bought into that mantra, that he is not going to sleep, going to drive into the ground, and he jokes -- he said, i had failure after failure. then i hit my 30's and i realized that i was much more effective, i was a much better leader, when i was fully recharged. emily: you have not been shy about donald trump bragging about how little sleep he gets
and how it is hurting his campaign. i'm curious. what if he becomes president, what does that mean for america? arianna: he's been bragging for awhile that he only gets four hours of sleep a night and he sleeps with his phone. i think ultimately his lasting contribution to american life is going to be exhibit a of sleep deprivation. he portrays all the symptoms described as symptoms of chronic sleep deprivation. inability to process the sick information, mood swings, outbursts of anger, paranoid tendencies, instability, and finally, he actually went so far when he called on women with abortions to be punished that he had to retract it. and he doesn't retract anything. emily: nobody thought he would get this far.
does it worry you? arianna: he got this far partly because of the media. the media really did not do their job. because he's so great for ratings, they had him on, he could literally phone it in on any show, even the biggest sunday morning shows, which they never allow any candidate to do. emily: does this mean you are a hillary clinton supporter? arianna: like you, we are covering the election and we are covering everyone. we believe that is our job. but it is not our job to pretend we don't have a very strong position on a candidate who is completely beyond the pale like donald trump. emily: my interview with arianna huffington.
you can catch the full interview sunday, not a clock a.m. pacific, 12:00 p.m. eastern. you can access all the interviews by heading to bloomberg.com and downloading the studio 1.0 podcast on itunes or sound cloud. joining us to break down the week in tech, caroline chen and sarah frier, as well as shira ovide, still with us from new york. i want to start with facebook. sarah, a huge development this week. mark zuckerberg laying out his 10-year plan. what do you think was most important about what we saw this week? sarah: all of these pieces of the puzzle that facebook has been talking about for the last couple years started to come to focus. virtual reality, artificial intelligence. facebook laid out how those things make sense as part of a social network. how we will use virtual reality to hang out with people even if we are not in the same place, and how artificial intelligence
will help facebook better organize your newsfeed by understanding the content and context of the post you write. you can decide now whether you like that future. emily: shira, how have you been watching this ambitious plan laid out by mark zuckerberg from the 30,000-foot view? shira: i was curious to hear from sarah. mark zuckerberg came out this week and he gave what sounded like a political speech. he talked about being fearful of people who want to build walls and coming together around global issues. it sounded to me like a mark zuckerberg we hadn't heard before. sarah: zuckerberg has been doing a lot of international travel. he's been meeting with dignitaries and diplomats and giving them a piece of his mind. when he talks about walls, he's not just talking about donald trump.
he's talking about the free basics app they built not being allowed to be used in india, shutdowns of their service in other nations that maybe don't like the idea of a facebook where people can share what they have to say. he's talking about facebook globally. he understands that in order for the company to grow, they need to have this open government mentality. and for governments to allow them to do their internet.org connectivity spreading initiative. emily: huge developments this week, caroline, in that potentially the future is gravely threatened now by regulators. why don't you lay it out for us? there are a lot of hypotheticals. caroline: we know that the regulator went to theranos, did
an inspection, and released that report which detailed all the issues they found at the lab. they responded and cms said this isn't enough and proposed hypothetical sanctions that they could bring down on the company which range from medicare not paying them, not reimbursing them, to most seriously, pulling their certificate, which means the ceo cannot own or operate a lab. the company has responded and they say they are working with cms to work it out, but these are heavy sanctions that could come down on the company. emily: sometimes, these tests are a matter of life and death. these are important blood tests. shira, what is your take on this theranos story? shira: what is the plan b? what if the ceo of this company
can't participate in the blood testing industry for a couple years? is there a theranos without elizabeth holmes? emily: i wonder, if things got to that point, caroline, the brand has been damaged at this point. can they survive under the theranos name? caroline: they have to publish data. i think the scientific community does really respect published peer-reviewed data. if theranos can show -- emily: it has been month since they have published. caroline: i think people would at least pause and maybe say, all right, let's see more and maybe give them a chance. i think the brand has been damaged. it is going to take not just one paper, but a number of papers, to convince the industry. emily: caroline chen, sarah
emily: japan is reeling from a second powerful earthquake. early saturday morning, a 7.3 magnitude earthquake struck the same region hit on thursday. both of these are the strongest tremors since 2011, when a magnitude nine earthquake killed roughly 18,000 people. given the frequency of these events, japan has put in place what many experts call the world's most extensive early warning system. split-second warnings are important for triggering
automatic safety maneuvers, like opening the garage door for first responders, interrupting delicate surgery, stopping speeding trains. joining us for more is scott nebenzahl with a company that makes earthquake detection technology in california. because japan has such an advanced system, it is quite fascinating to hear how it operates. explain the technology behind japan's system, how they monitor the quake, how they send out those early warnings. scott: thank you, emily. the japanese system is a government-run system. it comprises sensors they've populated throughout the nation. those sensors detect the earthquake. all of that information is transferred back to processing and redistributed for alerts and alarms. emily: so the u.s. has been
criticized for its systems just not measuring up, despite the fact that california is on a massive fault line. how much does the u.s. system lag behind what they have in japan? scott: there are a lot of issues there. we really don't have a nationwide earthquake warning system and we aspire to it. this is one of the things our company has been working in deploying in california. but, the issue with earthquake warning -- and earthquakes are completely different than any kind of natural disaster -- is time, speed. to build an effective system, you have to be sure that you can detect, analyze, and distribute, and be sure automated responses take place before the violent shaking arrives. the approaches we've taken here with the academic and usgs
approaches still contain latency on things known as blind zones. even as we just saw in this terrible event in japan, even japanese systems had a blind zone in these near source events. it is a very, very big, challenging problem, but you can architect solutions and approaches to where you can get rid of that blind zone and produce automated responses before the violent shaking arrives. emily: how far away are we from that kind of technology? scott: we are actively deploying it as we speak in the west coast and southern california. i think the government approaches are looking to enhance their sensor arrays. is this a government alone approach, or is this a government and private sector that can harness the innovation and also produce the reliability and robustness that the commercial and industrial
infrastructure segments will require before they are going to hand off that automated switch off? emily: all right, scott nebenzahl of seismic warning systems, thanks so much. really appreciate your insights. it is time to find out who is having the best day ever. today's winner is moviegoers. on wednesday, amc ceo said he was open to the idea of allowing cell phones in movie theaters, saying, you can't tell a 22-year-old to turn off their cell phone. the twitterverse quickly argued for a no cell phone policy. amc has backed down. amc wrote they could hear about and clear, this is a concept our audience does not want. that does it for this edition of "bloomberg west." don't forget to tune in this weekend. we will bring you all the best interviews of the week.
♪ announcer: the following is a paid advertisement for time life's music collection. >> ♪ chances are but i wear a silly grin ♪ announcer: there are artists will always remember. >> ♪ mona lisa mona lisa men have named you ♪ announcer: there are beautiful songs, words, and memories that will always touch our hearts. >> ♪ it's imss