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tv   Bloomberg West  Bloomberg  February 26, 2016 11:00pm-12:01am EST

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mark: i am mark crumpton. you are watching bloomberg west. new jersey governor chris christie today stunned the republican establishment when he endorsed donald trump for president. meanwhile, south carolina governor nikki haley said she would support trump if he wins the nomination. ray lahood and christie todd whitman have endorsed john kasich. a new poll shows a majority of americans back the government in its fight to compel apple to help open a terrorist iphone. 51% of americans said apple should unlock the phone to assist the fbi, 38% said apple should not. the white house said a nominee for the supreme court vacancy will not be announced before tuesday, when obama will meet with senate leadership at the white house. the government is confirming zika infections in nine women in the u.s.
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all were contracted overseas. global news 24 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world. from bloomberg headquarters in new york, i am mark crumpton.
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cory johnson: i am cory johnson, and this is bloomberg west. coming up, apple and privacy. plus, will a shift to mobile bring back a nintendo momentum? and donald trump singled out jeff bezos and his purchase of the washington post. apple ceo tim cook defends the company's refusal to help the fbi hack into an iphone belonging to one of the san bernardino shooters. during the question and answer portion of the shareholder meeting, not one person voiced displeasure or questioned tim cook's actions, but that does not mean all americans agree. according to a new survey by the pew research center, 51% of americans believe the apple should unlock the iphone and assist the fbi. also part of the meeting, an annual dividend hike, but rejecting a diversity proposal.
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tony maldonado called for the diversity proposal. he is an apple shareholder. you got rejected. tony: i did. i don't feel bad about it. we got over 5%, which is a threshold i wanted to meet, so i can't complain. cory: talk about what the proposal wanted. tony: we were not looking for quotas or tokens. we wanted to nudge apple to follow through on their 2014 promise to include more people of color in management. cory: what do you think of these
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proposals at shareholder meetings? paul: i mean, a 5% outcome is about as good as you often see in these kinds of cases. it's largely symbolic. it's flag-waving to the point where the company actually has to respond, but it's rare that it causes short-term change. in the long run, you are sort of packing them to death and saying pay attention to me. kudos to them for getting it this far. cory: how many shareholder meters have you been to? paul: hundreds. cory: have you? paul: zero, thankfully. cory: ok, that's what i presumed. they were looking at a lot of other things. gas emissions, recruitment policies, and looking at human rights in high risk regions. of all the things they were looking at, tony, besides the one you proposed, was there anything else that got you excited?
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tony: i expected the proxy to pass. i am not happy with what apple is doing on that issue. having one director voting to select is quite restrictive. and limiting it to 20 shareholders is critical. there are 5 million shares out there. cory: want to talk about the privacy issue. paul, what is your take on apple's defense of their case? paul: i think it's specious to
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unselfish. i thought their filing was in some way laughable. the notion that you cannot compel someone to fix a piece of broken software, it doesn't stand up to any reasonable argument. similarly, they made an argument where they were dismissive of the act the fbi is using and saying it's obsolete legislation, but they are equally happy to site of the communication assistance law enforcement act of 1994, which never contemplated anything like the iphone. they say that congress did not include such devices. congress couldn't even imagine such devices. cory: but the phone is not
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broken. it's doing what it supposed to do, which is keep people from being able to hack into it. paul: what apple is asking congress to create is a zone of extra legality, a zone outside the law that is harbored in a small device called an iphone. that's fundamentally contrary to a society of laws and a free democratic society. we either have absolute privacy or someone standing in the door is staring at me all day long is a kind of bipolar logic and false dichotomy. it's crazy, nonsensical, and will inevitably end up before the supreme court.
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tony: it's a mixed bag. congress needs to act, to be quite honest. cory: you are an apple shareholder. you have some of your wealth in apple stock. do you think the apple business would be hurt if they changed the privacy rules and allow the government to get into this? tony: in the short-term, no, but for the medium and long term, i think there would be some damage to the brand, and that the big concern. cory: paul, all of these other technology companies are lining up with apple. facebook, microsoft, google. they are lining up against you. why do you think these companies are doing that? paul: they see where this is inevitably going. this path of extra legality attached to public or private networks is going to go away because it's indefensible. in a society with laws and legitimate court orders, you cannot stand. they create dark paths for information to be transmitted and you can't respond to court requests. they all see that the writing is on the wall.
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we are about to find out that freedom from legal court respects with respect to hardware devices attached to the internet is about to go away. cory: paul, stay with us. tony, thanks for coming in. speaking of apple, samsung scoring a legal win over apple. the court says samsung did not infringe on several iphone features and will not have to pay $120 million in damages. they did say apple is liable for infringing on one of samsung's patents. coming up, when nintendo is slashing revenue estimates, what is next for the japanese game maker? ♪
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cory: the irs says taxpayers have been hit with twice as many cyber criminals as in the past. 724 thousand people. another 300,000 were targeted but hackers could not get access to their files.
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the irs is moving aggressively to protect taxpayers in the future. let's move back to our top story. i showdown between apple and the u.s. government over privacy. apple says they are working to make encryption stronger, perhaps with a key hire. he happened to be the lead developer of edward snowden's app called lead signal. we also have a former pentagon policy advisor. what does the core os team do? >> he is joining the core os security team. he is working on the security aspects of the core operating system of -- cory: is that the same thing that takes my thumbprint or whatever?
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>> touch id is a separate team, but closely related. touch id is going to use a lot of the things developed by the core os security team. cory: what was so special about the signal app? >> according to security experts, it is one of the number of secure apps out there today. it is getting rave reviews as the "most secure," for whatever that is worth. >> one of the big differences between signal and other applications that have been built to be secure is that this one was built in the open, is fully open sourced, peer-reviewed, and done in the open light. multiple experts have approved of it and approved of the crypto in it. when you build something behind closed doors, so to speak, it is
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harder for somebody else to go in and verify that it is in fact secure. cory: do you think apple has the capability to rewrite an os? what would it take to follow the government's order? >> they were pretty clear about what it would take. they said in the filing -- obviously they were half making up numbers, but they said something like three to four weeks and 10 people. maybe it's eight weeks and 10 people. but it's not inconceivable or impossible. i thought the most entertaining part was that they said part of the reason it would take so long is because of the difficult
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process to bring the software to market. it sounded like they were blaming their own app store, which was sort of amazing. cory: what you think about the technological issues in trying to change the way software works? is it permanently changed forever or could this be a one-off case? >> could they do it? yes. it is technically feasible. im not entirely sure they should do it. it's certainly setting a precedent of the u.s. government asking apple to do something specifically for them. they are a global company. the u.s. is not the only one going to ask for such a thing. >> i think he hit it right on the head. the concern is not about this particular case. it's about the precedent it sets. you have to think about the
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footprint across the entire world. what does this mean? what are the reverberating fx? i think that is what they are trying to keep a lid on. cory: technologically, should anyone have an expectation that any data is protected? >> that's a different question. i tend to have the expectation that people are not doing enough to secure my data. if somebody is telling me my data is secure and should be secure from the government and criminals, and other attackers both foreign and on our soil, the problem comes down when somebody tells you -- apple, google, or anybody else -- says we are going to keep your data secure, and we are not going to allow anybody to access it, and then the opposite happens. at the end of the day, once it's
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able to be done by the u.s. government and the fbi, there is nothing to stop a criminal, an attacker, a hacker from doing the same. cory: the new york times suggested apple is going to try to build a phone that could never be hacked into. is that possible? >> practically speaking, not likely. i am a security guy. i think everybody is honorable at some level. i think what they can do is make it so difficult that it doesn't make sense or it is too much of a burden for anyone to go through with it, but a 100% secure piece of technology is not really possible. mike's comments are exactly right. will people's expectations be that it is secure? we are not the only people listening to this conversation right now. the bad guys get a vote.
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they are not going to stop communicating. they are just going to go somewhere else. cory: jesse jackson actually spoke out about this today. he said where we stand on the controversy is a measure of our character. paul, last word to you. paul: i thought that was depressing and cultish, quite honestly. you can't contract out of the law. i can promise you perfect privacy, but that's contracting
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outside the law and that has nothing to do with being a strong leader. cory: paul, always good to talk to you. thank you all. coming up, challenges for nintendo. the company is slashing its revenue forecast for 2016. and can mobile gaming prop up the finances of the struggling game maker? ♪
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cory: in funding news, alibaba looking for cash. yes, the company that just went public. they are suing eight banks for as much as $4 billion. that money could be used to fund acquisition plans. alibaba already has $11 billion in existing loans and credit lines. lots of cash available. nintendo is slashing its profit forecast in half, blaming weak sales of its handheld game player. super mario has been struggling, but the company is betting that its first ios and android apps will be enough to improve the bottom line.
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maybe. so, nintendo is very interesting because here is a company that sort of invented and popularized handheld gaming, and now you see that they have avoided the most popular platforms, the android and iphone's. >> if you look at the first half of last year, the stock almost doubled. they were open to embracing the mobile gaming platform. if you look at the forecast, it's a pretty big market. the problem is, the expectation was they would start launching these titles sooner, and now the next game coming out doesn't use any of the flagship characters. cory: mario? >> no mario. cory: come on. >> they are supposed to launch titles by march of 2017. it's more of a waiting game right now. the nintendo annex system was supposed to debut this year. we don't know exactly when it is going to be launched.
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will that stand up against ps four or xbox one? not likely. your media players at home, apple tv, amazon fire, they are also capable of playing decent games for the casual gaming community. cory: is there something about nintendo where they don't want to use their main characters? >> that is the reason the hardware sells.
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if you were to give up mario, zelda, or these games on playstation or xbox -- cory: or the phone. so, they kept their best games only for their hardware so the hardware would be extant and other game makers might develop for it because they arty have the best stuff. >> now the strategy is to develop newer games with those characters. whatever new titles are coming, we went to see mario, we want to see zelda. even if it is a new game, it is coming to this platform. and they are not going out of fashion anytime soon. cory: do we expect to see continuing declines from this company?
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>> it's all going to be contingent on the mobile game launches and what the annex platform does. they have not given a lot of details, but expectations are that if that platform could help them in the interim, that might create some healthy competition with the ps four. cory: it's fun watching these console wars as they continue. great stuff. you are so smart. we are going to dive into the president's latest science project, a survey of one million americans in the field of prescription medicine. if you like bloomberg news, check it out on the radio. there are lots of ways to hear us. check us out. ♪
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cory: i'm cory johnson in for emily chang and this is bloomberg west. amazon may be looking at selling small tv bundles via the internet. let's bring in lucas shaw in los angeles for more. lucas, i have been meaning to tell you i have been digging into amazon's video offerings a lot. they show the state of the union. it sounds like they are looking at digging into live tv or this
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could be a whole lot more. >> i had heard that amazon was looking to put together a live service. we had heard that about apple. apple suspended those plans. amazon is exploring it. they certainly have the capacity because of amazon web services. it seems like something has advanced or changed. in the past week, the president of espn and the ceo of amc commented on this. my question is, is amazon close to putting something in play or
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are these media companies just looking for someone else to help them out? cory: would this be coming out of the amazon studios? >> i don't know, because amazon studios overseas at this point most of the production and some of the acquisition of projects. running a live tv service would be a different proposition altogether. again, i don't have an amazon has settled on how this fits in their ecosystem, but they are certainly investing a lot into home and video. cory: it is interesting to look at all the different ways -- you know, you can look at the way amazon's business works in prime and sort of see that they have a much more robust offering in terms of the number of titles and so on compared to netflix. part of it is because of the different ways they offer. they have pay-as-you-go offerings. and the streaming business is getting bigger and bigger, including original content. clicks you can think of amazon prime or instant video as a combination of licensing plus blockbuster or itunes online. you can find any tv show or movie one. you just have to pay for them. cory: thank you very much. cool story. one we will keep an eye on. ♪
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cory: let's take you back to some of the biggest stories we have been following this week. emily chang caught up with google's head of android for an exclusive interview on the plans for virtual reality. >> cardboard launched over a year ago now. it's actually the biggest vr platform in the world from that perspective. one of the important things about it is, there is the technology, and then there is what you do with it and the content that is available. what cardboard has enabled with this massive reach is that developers have started to pay attention and make their apps or games available. in the end, that is what the
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customer is going to experience. they are not going to experience vr. they are going to experience a climbing reality. cory: here's what mark zuckerberg said in barcelona. mark zuckerberg: there have been more than one million hours of 360 video watched. on facebook, more than a million people watch 360 videos every day. so, that's happening. but that's just going to be one part of the content ecosystem for virtual reality. cory: sarah frier covers facebook for us. interesting stuff there, thinking about social. it's finally coming together.
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>> right, and in a couple of weeks we will see the first oculus consumer headsets in a while. this is really ramping up. it's going to be slow. this week was the first week people looked at zuckerberg as -- i don't know if you saw the iconic photo that was taken of zuckerberg walking past people with their headsets on. they had no idea he was right next to them. they were all sort of in this futuristic world while he was walking by. he looked very satisfied. this is something you see facebook doing a lot of, live video, moving more into 360 video on the news feed. they are trying to get everyone used to the idea of consuming video content in new ways.
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cory: caroline chen also with us from bloomberg news. really mind blowing story about precision medicine. >> last year, president obama announced a precision medicine initiative, which is basically the idea of wanting to have a million people sign up and give their personal health, may be genetic data in search of finding more personalized medicines, where the medicine is crafted for you based on your genetic health and information. this week, vanderbilt and google were asked to create a portal to start enrolling one billion patients. they want to see why healthy people are healthy and why sick people are sick. anyone can volunteer. cory: this notion that certain pills could actually travel through your body and target just the things that are wrong -- i think about the 1966 movie of fantastic voyage with raquel welch.
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they were in somebody's blood stream. listen to what president obama had to say. president obama: they were not just identifying or giving researchers and medical practitioners tools to help cure people. there also empowering individuals to monitor and take a more active role in their own health. cory: sounds like he gets this. >> yeah, and i think the thing that is interesting and different about this life study is that they are saying they want people to be not just subject's. they want them to participate. early volunteers are going to be allowed to give feedback on what data should be collected, how it should be collected, how often. and ultimately, they may get some information about themselves. they are looking for people to be active participants, not just studied by the doctors. cory: there has been a rapid decline in cost for the human genome.
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23 and me is starting to see the benefits of that. >> yes, that is the revolution driving this and making all of it possible. cory: it's interesting to see the cross over it's mostly google getting this health care feel. >> and also zuckerberg. not through facebook, but his charitable donations and his funding of projects that he hopes will cure the next big disease, advance human health and longevity. i think he really sees this stuff as the future. >> absolutely. or like sean parker, who has
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given a lot of money to an allergy center at stanford. they are really into this. cory: it's pretty interesting. and again, facebook looking at a media company or an advertising company. thank you so much. always good to see you. good to have you here. the new york stock exchanges hitting the brakes. they will roll out a new platform called pillar. it's going back to test mode until march 8. it was originally supposed to roll out in 2015 and had already been delayed. the exchanges moving all of its markets to pillar. but the delayed makes that a little less likely. twitter just announced a
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redesign of their embedded timeline. starting on march 3, users can start embedding their tweets with profiles, list, collections, and polls. this is the latest effort by jack dorsey to make the site a little more user-friendly. coming up, expedia continues to thrive. we take a look at the companies winning strategy, next. ♪
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cory: time for the time machine. this day in history, the fcc adopted net neutrality rules one year ago today. this ensured that all web traffic would be treated the same, preventing companies like at&t or comcast from blocking or slowing online traffic in return for higher prices. the vote was split on party lines and backed president obama. the fcc was sued soon after the ruling. marco rubio and to the other republican candidates have vowed to repeal that neutrality altogether. one company continues to thrive in the millennium.
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expedia. we explore how the travel company survived the 90's and thrives in the oughts. they do extensive research on the psyche of the modern travel planner. drake joins us from new york. talk to me about how expedia was unique. >> i spent a little bit of time in a lab they have where they call people in and have them get online and book travel. they have gotten them all hooked up with various sensors measuring impulses and facial muscles, looking at where they are looking on the site, using an eye tracker. they are trying to deconstruct the psychodrama that is travel planning. it's one of the biggest purchases people make online. the prices of tickets are always changing, the prices of hotel rooms, so they are always trying to figure out how to push people's buttons to get them to spend more. cory: it's fairly interesting. when you read through the annual report of expedia -- many businesses are under their umbrella.
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how independent are they? >> that was a point the current ceo made. if you go back 10 years, expedia was struggling. their margins were shrinking. they were getting destroyed by especially in europe. they made the decision that these various properties, hotel, hotwire, and more, would be treated more like a confederation than a nationstate. they would all have their own marketing strategy, tech strategy, chief technology officer, and they would do what they wanted to do and compete with each other. it's a strategy that has risks because you end up replicating things and bidding against each other. but it has turned out to be a bet that makes sense.
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cory: it's pretty interesting. it seems like a harder way to do things. one thing that fascinates me is the shrinking time in which people book their trips. i wonder if there are similar trends that expedia looks at to get their businesses to respond to those trends regardless of who is running them. >> there are funny little things they have found. in france, people seem very interested in the breakfast options at a hotel, so you will find that in the listings. but they are pretty agnostic about stuff. they will test everything from how big a button is to the e-mail language and that kind of stuff. they are just trying to get these tiny tweaks through the site and bit by bit it ends up optimizing it more and more. cory: quickly, can we see the hand of barry diller in all of
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this. >> yes, he is in control of the company and the votes and he allowed them to spend this money restructuring in a way that took several years but has paid dividends now. cory: i have been covering that guy forever and i still can't get a handle on him. he's a really interesting dude. you wrote a terrific story. we appreciate it. we are watching reports on a bipartisan bill that calls for a digital security commission. that bill is expected on monday. it comes amid the apple-fbi standoff over the san bernardino terrorist's iphone. donald trump vows to take on jeff bezos. the republican presidential
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candidate had some choice words for the amazon ceo. he said -- i want to do my trump voice. should i? that's a resounding no. but he did say -- you really should have let me do the trump voice, but fine. this is not the first time the two have sparred. jeff bezos offered to ship trump into space on his rocket. ♪
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cory: insurance startup zenefits is facing a regulatory probe, accused of cheating on it required training for employees selling insurance. the ceo says job cuts will help the company rebuild. imagine you work for a startup and one day you get to the office and see hundreds of flyers saying your common stock shares are worth nothing. this happened at palantir. the guerrilla campaign was found to be little more than a smear. here to talk about it, ellen hewitt, venture capital reporter. we so often have the
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conversation about devaluation of companies, and we never seem to know the terms of the valuation, which is everything. do you want to try to explain it? >> here is what the flyers were getting at. they were saying to employees, beware, the stock options you were given when you joined -- and often, that is a major part of the compensation to attract top talent -- but the idea behind it is saying you have all these options. you thought they would be worth a certain part of the company, but the company keeps raising money. new investors come in and they ask for senior liquidation preferences, which are agreements that say whatever
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happens with the company, so and so is going to get paid first. and often what you see is that when people get paid back, it's the employees and their stock who often come last. cory: in some ways, it's about the time of the deal. the investors in the last round, who would have lost money in the deal, were given a lot more shares to make up for it. i like to think of it like a pizza. if you cut it into four pieces, great. if you want to raise more money, cut everyone's pizza into smaller and smaller pieces. that can be very disconcerting if you are one of the employees. >> exactly.
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i think a lot of early employees when they sign up just may not know what they are up against. you get a feeling that if you have put a lot of time and investment into a company, maybe you have been working there several years and banked on the idea that the compensation you got in stock options would be worth something, it could be different than what you expected. that's what these flyers are getting at. cory: as you point out in your story, a study showed that a lot of -- these are happening a lot more in the last few quarters. quick so, one of the things the study pointed out that i thought was interesting is that a percentage of deals involve senior liquidation percentages. in the last six months, so many
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companies wanted to get to that unicorn valuation. 40% of the deals priced the company at a valuation of one or $1.1 billion. often to get to that valuation, you will have a dynamic between companies and investors where they say look, we want this valuation. the investor says fine, give us extra protections, and we will agree to it. >> kind of a guarantee that they won't lose money. >> right, and the company gets what they want. the investors are willing to do it as long as they are protected. cory: i talked to a venture capitalist about this recently. high valuation companies don't want to give up a lot of shares. you want, when you are selling shares, to only be selling a
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few. that makes sense. >> it does, and what it illustrates to a lot of people, myself included, is that we look at the valuation as a number that means something, but that's not quite true. an investor gets a percentage of the company at this price. you can do the math. but it's not always that easy. cory: look, we are going to see egregious deals and employees who have been at a workplace for many years walk away with nothing. it's part of the experience. great story and bloomberg news. check it out at good stuff. what we have all been waiting for. who is having the best day ever? it's me because i'm hosting the show today. no, it's not me. it's robin lee. his stock soared 7%. just another day in the life of china's seventh richest man. monday, don't miss our conversation with the symantec's ceo. have a good weekend. ♪
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