tv Bloomberg West Bloomberg October 7, 2014 11:00pm-12:01am EDT
>> live from pier three in san francisco welcome to "bloomberg west" where we cover technology, innovation, and the future of business. twitter suing the government over the right to publish more information about nsa surveillance orders. twitter says the government's restrictions on what can be public violates the companies first amendment rights. other tech companies including google have agreed to follow the governments rule. facebook is going to start targeting users with location-based ads that will show from businesses within one mile of a users's location provided the user has granted facebook app permission. they have been releasing new ad tools as they try to further boost revenue.
blockchain, allowing users to store bitcoins, has raised a first round of funding. they will use the money for international expansion. sam sun is still the worlds largest mark phone maker, but competition is eroding their dominance. it is starting to show up in samsung earnings. samsung is still the world's largest smartphone maker -- samsung. this is coming after apple rolls out the iphone pushing out into phablet territory. they're also getting pressure from korean rival lg and xaomi. joining me now in studio, our editor-at-large cory johnson and senior director of congressional affairs and tread at the korean economic institute.
troy, are samsung's stays behind it? >> right now they do face significant challenges in emerging markets. it's getting squeezed by apple at the high-end and low-end device series of newcomers. micro max, xaomi, firefox in southeast asia. right now, we're seeing two storms. the leadership transition going on in two, a challenge to dominate the smartphone market. >> read between the lines for us. there are more than the headlines might suggest. >> the headlines are sparse. one of the peculiarities of the this -- of this being a korean company, they are required to tell us in the quarter on the top and bottom line. what are your revenues and profits ballpark? this could have been a horrible sales of refrigerators and best buy for all we know with it
being such a big number but it follows a trend where we are seeing an increasing sales decline for three quarters now from samsung. we know they've been losing share across the board in smartphones. you'll see a lot of stories out there saying the apple iphone 6 is killing samsung. there were only a few days into the corridor. >> some people could of been holding out for the new iphone. >> the idea that there is a big change in sales because of the iphone is probably not true but the trend goes way back for this quarter and that's why we are looking down on the numbers. we will see exactly why this is happening right now. however today, it's a great day of speculating. >> let's speculate. troy, where do you think this is happening. are they getting hit on the high-end, the low end? is it across the board? is this smartphone saturation? >> i think i agree that the iphone 6 is not the biggest problem samsung is facing right now. ultimately, what we're seeing are the margins getting hit and the emerging markets and the lower and. samsung spent a lot of its energy trying to do its height and product, but they let the
mid and lower markets fall behind and go. this is where they are getting hit by companies coming in the products that are just as good but essentially lower-priced. this is the challenge we are seeing from them. >> there is a suggestion they're losing share in china and india but what about their other markets? chips in connected cars and smartphones?
could that be the future? >> chips are a huge deal and a place where price could make a huge difference. as bad as the sales decline is, the profit decline is much more alarming and it suggests in order to move product they are cutting costs in order to compete with other carriers. if you imagine china, they are offering very full-featured phones for much lower prices. competing against apple, they have to offer all kinds of features very expensive to offer. the combination of those things could be the reason we are seeing this great impact on the profit margins of this company during the price dynamics into the company. >> troy, talk to us about their other businesses and where they should be placing their bets. if it's not happening in smartphones, should they be focusing on connected cars and connected homes? >> one of the challenges is samsung became over reliant on the mobile sector. they laid out five growth areas one of which was the solar powered industry. what we are seeing is now there is talk they may close that business. in terms of the internet of things, that's what they are pushing now and i see opportunities for them given that samsung is a producer of household goods, appliances such as washers and dryers, refrigerators. they bought smart things a few months ago. they can take and really try to
tap into the connection of their products and how we are moving in the future but are really do think they need to look to other areas for growth and try not to focus so much on mobile. >> solar has been flooding into the biggest markets and it's a business principally governed not on a growing business but very big changes in energy policy and a handful of countries that decided to subsidize the sector around pullback. it's been a very difficult place to make money but in the case of samsung, they're in the midst of a product transition. the corridor where new products are introduced can be the slowest he can they're ramping up for big sales. the fourth quarter were so important when it comes to smartphone sales. it's too early to ring the death knell. >> what about robots? we just read a thing where more and more jobs would be replaced by robots. >> especially me.
>> a robot, cory, would be easier to deal with. troy, thank you so much for joining us. obviously be continued to follow the story and wait for more details between the headlines. hp's big break up into two companies does not come without a cost. the extraordinary numbers behind hp's separation next on "bloomberg west." ♪
>> i'm emily chang and this is "bloomberg west." ibm is once again trying to offload its money-losing chip many factoring business to global foundries. talks broke down in july but have resumed according to a person familiar with the matter. ibm is offering to pay more than $1 billion, more than what it had previously offered for the company to take the chip unit. ibm has trying to get less profitable businesses off its books as they deal with nine straight quarters of falling revenue. the hp separating into two companies has investors hoping for a revival of the 75 or older silicon valley pioneer, but what did these changes really mean? editor-at-large cory johnson has been digging into the company's financials, as he loves to do. what have you found?
>> hp also announced plans to lay off another 5000 workers and take another 600 million dollars and extraordinary restructuring charges that increases the size of layoffs to 55,000, restructured a $4.7 billion right now. what's behind this permanent state of catching up with hewlett-packard? joining me now via skype to look at those numbers on what restructuring really means is stanford economy professor lee. what is restructuring supposed to be? >> when a company goes through its lifecycle, they will encounter what we call life events. it is supposed to reposition them to be more competitive going forward. >> is restructuring as an accounting treatment representative of a midlife crisis, the sports car and blonde? or something different? >> in each case, we look at it as it is an opportunity to
reinvigorate the company. in this case, hewlett-packard is facing a lot of issues and the separation of the two entities is one way to try and refocus. >> one thing that really jumped out at me and has over time is not meg whitman use of restructuring or mark hurd's, but for one dozen years, this company has had significant restructuring over and over and over and over again. is this a common thing? how where would you say this kind of thing is in the world of technology and/or corporate finance? [laughter] >> cory, stuff happens. what you do not like to see is stuff being called one-time charges when in fact they are recurring and they seem to happen every year. you like to forgive recurring
charges that have to do with major changes in a company's operations, but if it happens every year, they are just asking you to ignore losses year after year, it's probably not a good thing. >> why is it not good to see that and a company year after year? >> what we have seen in academic research is when you see companies who are re-current tree structures, we find that the market seems to under react to these charges and over the next three years, the firms that do this tend to have lower cash flows as well as lower market returns. >> the firms that restructure more tend to have lower returns
and lower cash flow. when the analysts look at hewlett-packard, they look at the non-gap numbers, not the year ending. the adjusted earnings but the gap earnings for this company are significantly lower, 40 $4 billion compared to the non-gap number of $80 billion. -- $44 billion compared to the non-gap number. >> many things being omitted are employee stock option grants and so forth. the company would like to argue that it is more realistically reflecting future cash flows or earning power. on the other hand, it just could be that they want to take the bad stuff out of the gap earnings. >> who would not want that? is this a unique thing for technology? they are known for their ability to embrace and effect change. or does this happen more in old technology companies being affected by the change? >> i think it happens in both but a very large item is, in
fact, stock-based compensation. for many of those companies, that number is the main adjustment between gap income and pro forma income. >> i'm thinking in terms of restructuring. is it something that all companies or new tech companies doing more acquisitions that do not work out? >> we see it across the board. there is a time where more than half the s&p 500 had restructuring charges in their income in a single year, which is pretty broad. >> you think the hewlett-packard thing is not unusual? >> i think the event itself is
not unusual but the magnitude and the consistency with which they've done it -- well, it raises eyebrows. >> stanford economist charles lee, always appreciate your time. >> be sure to catch our special coverage all day tomorrow and thursday live from vanity fair new establishment. we have a great lineup of guests joining us including the ceo and cofounder of life media as well as tom preston, former ceo of viacom. that interview at 3:30 p.m. eastern, 12:30 p.m. pacific writer on bloomberg television. go pro is launching its latest line of cameras at rest by. how much is the camera maker changing the video industry? that is next on "bloomberg west." ♪
i'm emily chang. go pro has launched their newest line of cameras this week. they tripled go pro space at this by stores. they are excited and they have soared nearly 300% of the june ipo. after a disappointing first earnings report as a first company, they are partnering with the struggling retailer. is that a smart strategy? with us here in the studio, is it a good strategy to partner with best buy? >> it's a very visionary company. the launch of this product was online as well as best buy. they're off to a fantastic start. it looks to us like the hero four black is the standout outperform her. they have successfully moved the bar to the $499 price point. that's a 25 are sent increase over the high-end hero three plus. they are delivering new value, 4k 30 fps. >> their first earnings was not great but the stock keeps going up.
do they have more to prove? >> the hero four arrived on time, arguably early, for the holiday season. it's the kind of execution you like to see, back away apple would execute when steve jobs was still around. the company is proving themselves right now. the early adopters have proved they are on the something with the hero four black. >> steve jobs and apple? really? camera on a stick? >> this is a company that transcends looking at it as an action capture device. we have a young, fresh management team that is proving they get it in a new age of facebook, twitter, online retailer. >> i will give you all of it. i love the go pro on my helmet, snow board.
the company has a valuation of 12 billion dollars. sony has a valuation of $19 billion. >> those should easily be flip-flopped already. it's going to be at some point. you have to give it time to get there. what you missed in that litany is the go pro network. you're not spending enough time watching go pro video. it's a lifestyle company. >> they don't own that. >> they curate and create. >> do they get revenue from that? >> they do get money from the added presence. >> how well are they managing the transition to becoming more of a media company? is that really happening? we are looking at this video and they have certainly changed the sports video industry, the entertainment video industry and a certain respect, but is it helping their business? >> if you look back in time it's the same way walt disney transformed the entertainment industry, nike with shoes. that is what we are on the cusp of hearing to see a lot of brilliance if you spend time on the go pro-branded channel. >> i love this.
let's talk about this. they do not break out separate numbers from media. they have virtually no revenue from media. disney did not start making cameras and discover mickey mouse. >> it was more media. >> emily does not remember mortimer. it was before her time. when are we going to see meaningful revenue in media?
>> i think we will get that in the 2016 timeframe. we may get it sooner than that. spent time looking at what this company is doing in ucd tie in with xbox, a great branding opportunity with the appropriate platform. you see what they've done in terms of success of the youtube-branded channel. i think you're seeing the seeds of that already. >> alex gauna, jmp securities, go pro as the next apple. with hp splitting into two, oracle ceo larry ellison stepping down, what did these major changes in cloud computing main for salesforce? we will speak to their cmo next. ♪ >> time now for bloomberg television "on the markets." i'm julie hyman. declined across the board that accelerated into the end of the day triggered by a couple of events. german industrial performance coming in weaker than estimated in august and the imf cutting global growth forecast and warning of frothiness in the market. ♪
>> you are watching "bloomberg west" where we focus on innovation, technology, and the future of business. i'm emily chang. the enterprise and cloud computing arena has seen a change. larry ellison stepping down after decades as the ceo of oracle. competitor salesforce is kicking off its annual dream force conference in san francisco and joining me now to discuss the shakeup in the cloud business, executive chief marketing officer, lynn. you guys have a huge lineup for dream force. what will you guys be talking about? >> dream force is the super bowl of cloud computing. we have over 100 35 thousand
registered attendees. we will have millions of people watching online. online, it's not only the biggest but the best and most exciting. our themes are about innovation, fun, giving back. you'll see that all through the week. >> some of the speakers hillary clinton, al gore, mark andreessen. how do you create this lineup? >> everyone is coming to dream force next week. we have government leaders but we also have the world economic forum the founder and inspirational speakers like tony robbins. we have technical luminaries like mark andreessen. we are so excited you will be interviewing marc. >> i get an hour with him on stage. >> we have over 2000 customers speaking.
>> how much does dream force impact the bottom line? what the salesforce get out of this other than marketing? >> it's a huge investment for us, our community. this is the place to be in the gathering to learn what's next in technology, to inspire, to motivate and give back. that is so much of what we do at salesforce and it's an opportunity for all of us to give back. each day we have a focus on giving back. monday is all about fighting hunger to we will raise one million meals and we want the whole community to come out and help us with that. on tuesday it's about children's education and children health. we have the bruno mars benefit concert and we've already raised money to benefit children's health and we have that's coming to dream force on sunday helping that's transition back to civilian life. >> there's been so much going on in the space.
larry ellison and marc benioff have had a friendly and not so friendly rivalry over the years. how does this change thing for salesforce? >> we are 100% focused on our customers success and we know it is predicated on their success. our customers propelled us as a leader and an innovator. we have been named one of the most innovative companies in the world. our focus remains the same, helping our customers connect with their customers in new ways and helping their customers become more successful. >> what about hp splitting into two new businesses. hp enterprise will be going on some sort of acquisition spree. how does this affect salesforce? do you watch what's going on? >> hp is a great partner and a great customer.
so many of our enterprise businesses work with salesforce and hp. we watch what's going on and we are deeply involved, but our focus is on that customer success and that is where we remain focused. >> any hints on the tweet? >> we will be announcing analytics cloud at dream force but that is just one of the new announcements we have. we've been working the last couple of years on some major new innovations in technology. you've got to come to dream force to see. if you cannot come to san francisco, join us online life. >> i will be there. >> i want to give you a can of food to help us reach our one million meals. >> executive marketing officer of salesforce, lynn vojvodich. could a robot put you out of a job? robotics changing the future of labor next. watch a streaming on your phone,
>> i'm emily chang and this is "bloomberg west." get ready for the robot workforce. predicting they will place -- replace one third of all workers calling them a super class of workers that could perform a wide variety including physical and intellectual tasks including financial analysis, medical diagnostics, and data analytics. there may come a time when robots and high-tech displays most human workers, but in some fields, this is really the reality. eric schlosser describes the technology the government has used for decades to build
nuclear arsenals. editor-at-large cory johnson spoke about some seriously close calls with weapons of mass destruction. take a look. >> my book is about what can go wrong unexpectedly and complex technological systems. if it goes wrong in software, it may be a problem for a couple of days, but if it goes wrong in nuclear kinetic control systems, you may lose a city, a state. there could be nuclear war. the book is an exploration of how very brilliant engineers tried to solve some of these technical issues. they try to save the lives of millions. >> i'm a big fan of your work, as i've told you over the last day or so, but i was really surprised there were so many lessons about the world of technology and what it means in the world to which it is implemented and how many random guesses there are hoping something would work. there was a lot of that when the bomb was first invented. >> the atomic bomb, you think about how tiny the computing power scientists had and it was basically invented for the weapons program, but there was a
lot of guesswork. there were all kinds of calculations that were wrong. when we had the first deliverable hydrogen bomb, they were wrong by a factor of three. it was three times more powerful than they had estimated and they were worried it was going to be completely out of control. when you look at nuclear weapons program particularly in the late 40's, 50's, 60's, you have the most brilliant technical minds probably in the world and yet there were still unexpected things that happened.
goals for nuclear weapons. >> as we see in all kinds of designs now. >> there were extraordinary compromises that had to be made in designing these weapons. the book is not just a critique of technology. some of the engineers in the book are the heroes of the book, but if there is a moral in that, it's about eating ambitious but knowing at the time what you are
designing. there's a phrase used by early software designers that i use in the book which is the titanic effect. what that meant is the safer you believe your system to be, the more dangerous it's becoming. there needs to be a sort of constant vigilance and the greatest danger i think with the nuclear weapons complex today and i would argue with many other complex technological systems is complacency, a sense that it works just fine and all is well. it's when you get that attitude that the big problem's arise. >> was also the notion about the systems around it and the legacy. you tell this amazing story about a nuclear bomb that nearly went off in arkansas in 1980 and you go into great detail about it, a story of how the old systems, the people were maintaining them with the simplest of tools did not have the control been the most modern technology even of that day would have provided. >> it's a real danger. we allowed our military in many ways to become obsolete after the vietnam war. unfortunately there's a lot of resonance in that today. the minutemen with the missiles were suppose to be retired in the early 1980's. when you go to the launch complex for those missiles, they have computers that date back 25, 30 years and software that has been updated but has layers
and layers on top of it. who knows what sort of switches are there? people can come away from the book with different attitudes towards this technology, attitudes toward nuclear weapons. we can all agree if you're going to have these things you need to spend to maintain them properly and train the people maintaining them. >> happening this year. president obama spending $10 billion, more than has been spent since the 1950's on the program. does that technology spent make the bombs a lot safer? or is not just increasing the capacity of the arsenal? >> right now, we are not spending what we need to spend to be making the bombs safer. we need to be spending on the nuclear command and control systems have a wiring, cables, training. a lot of the spend you just described is laying the groundwork for new weapons systems, some of which we may need, some of which we do not. i think we really need to debate on our nuclear weapons complex because right now we are scheduled to spend $1 trillion over the next 30 years -- >> $1 trillion? >> what are we going to get for that money? what do we need to train this company -- country properly? this whole issue has been off the radar. people assumed when the cold war ended that the need for nuclear weapons went away and it has not. one of the aims of my book is to just bring this whole world back into the spotlight.
>> editor-at-large cory johnson with eric schlosser of "command and control." i went to get to our "bottom line" anchor mark crumpton. >> u.s. airstrikes to not seem to be doing enough from stopping islamist state militants from taking over a key town. they have entered the town of co-body. the military advance has sent more than 160,000 kurdish refugees fleeing into turkey. the pentagon admits that they will have possible exposure to ebola. they will run as many as seven testing labs. the u.s. is sending 7000 troops to fight the spread of ebola. the class 2014 has turned in the lowest math scores in the sat math entrance exam since the year 2000 and it's a reinforcing concerns that students are falling dangerously behind in math and science. scores for reading rose one point writing fell to the lowest mark since 2006.
>> welcome back to "bloomberg west." human resources turning to big data for decisions on who to hire, fire, and promote. it's pushing companies like netflix to look for outside help from the likes of oracle and workday. we are wondering what kind of data is being collected and the growth of the marketplace. >> they offer hr to all kinds of small companies and helps them move a lot of the things that they do in house as they grow. what i want to talk about is not
necessarily hr software but how it is changing hiring. how employers know much more about what's working among the people are, and not just the way we look at a resume and try to figure out this person? >> we support 9000 businesses in america, 258,000 employees so we understand what it takes to attract and retain great people. we are doing over 6 million transactions. everything from a paycheck him a bonus check to a change in marital relations. it is all of those things. if you're going to hire a java programmer in san francisco, i can tell you what it takes to hire them. >> we track retention, turnover, what kind of resumes work best in what kind of jobs.
>> how is the hiring practice different? two thirds of all jobs will be replaced by robots. it sounds like the hiring function is being replaced by robots. there's a dynamic where data sourcing changes the way it works. >> there's currently a fight for talent despite the future for robots and the jobs are being created in these small companies, a lot of them in san francisco. it needs to be done online and it needs to be selecting the right people so you were looking at resumes from the right people for your particular job. it varies widely by industry. >> are there certain data points more revealing than we have historically given credit to? >> the data points i see are the people who are able to have an impact on a company over a longer time. declaring success in short runs and organizations is hard to quantify and qualify. >> we see this a lot in the executive ranks. they become ceo and sometimes there are great results and sometimes they are are not. -- there are not. >> it cannot be done all by
computer but in the end it takes a human judgment and having a great hr department, whether it is trinet or in house, to present you as the executive for the right people. >> are the goals of trinet different than workday, oracle, peoplesoft? >> what trinet is doing is being your hr department. it is also the people who are on the ground that come into your office. >> is the goal of the product a
different type of information? >> the goal is to provide the full suite of information, the people, the benefits, the software. we are aligned with making your company successful. it's not only software. it's people. >> i wonder if a robot would hire me next time. burton goldfield from trinet, i appreciated. >> can we replace you with the robot? that's the question. >> there's probably an app for that. >> it's time for the bwest byte where we focus on one number that tells a whole lot. what do you have? >> $11,496,000,000. that's how much hewlett packard has taken in restructuring charges since 2002. now they've announced another $600 million on top of that. it has the effect of boosting
the non-gap earnings that the analysts like to look at. academics support they will have more trouble delivering real earnings as well as increased cash flow in the future. >> obviously hp has been making big acquisitions. where did the problems start? it was not under meg whitman that the problems began. >> it's a difficult business to be an. they made the choice is to go into certain technologies in the world has gone in a different direction repeatedly at hewlett-packard though. when you look at the actual effects of this of the company, ignoring the restructuring charges ignores what's going on. we can see from now 14 years of those charges and it's ridiculous. it's not extraordinary at all. it's also important to note that i think there have been so many acquisitions since the company has overpaid for and they had to write them down into restructuring but it does set
them up to have a few good quarters and someday, one might think, maybe 12 years later the jokes on us. i don't know. >> doing know yet how the charges will affect businesses separately, hp ink and hp enterprise? will they take these on differently? >> the split of the two companies will probably not happen until the end of next year. will these companies then at that point have worked out all of this stuff out in the wash? will the restructuring stop because they have to effectively value and not be able to not restructure because the split in itself is another restructuring and the two businesses will not be looking back any longer? >> cory johnson editor at large. i know you will continue to dig through the hp numbers for us. don't forget to catch our special coverage live from vanity fair's new establishment summit all day tomorrow and thursday. we will be interviewing the editor of vanity fair tomorrow