>> live from pier three in san francisco, welcome to the early edition of "bloomberg west," where we cover the technology companies that are reshaping our world. i am emily chang. let's get to the rundown. target reveals that the security breaches far bigger than originally thought. 70 million customers may be affected. we look at how it happened.

allowsoogle policy people to e-mail you even if they do not have your address as long as you're on google plus. some are already calling it a stocking too old. a new policy of the nsa could of protectingen data to carriers. first, the lead. 110 million. that is how many customer accounts may have been compromised in a massive target data breach that just got a lot bigger. we are talking about names, phone numbers, home and e-mail addresses stolen in addition to credit and debit card data. it is unclear exactly how many customers were affected and if the breaches overlap. target says sales are going to take a big hit. olivia sterns joins us from new york.

how many people are we really talking about? we heard about 40 million people last year. now we are hearing 70 million. is that on top of the 40 million? >> it is likely an overlap. but the bottom line is a lot more people were compromised and their information was compromised. the 70 million people could have had their e-mail addresses, home addresses, names and personal information compromised in the security breach. previously, we heard it was card data, card and pin numbers that were breached. target has come out today and said, unsurprisingly, that this will have a financial impact and may have lowered their sales guidance going forward. they have cut their earnings forecast by 19%. salesusly, they thought would be flat for the holiday season. now they are saying they're going to be down by about 2.5%. they say until the breach -- until it was

on decemberctually, 19, sales had been stronger. in the past couple of days, sales of once again picked up. perhaps that is a sign that the breach was not as bad as people thought or had not earned has not burned customers as badly as they thought it would have. >> how do you find out if this affects your? >> they only have partial information here. try say they are going to to reach out, but that is 70 million people. how effective that could be is anybody's guess. they say they are going to offer zero liability for any charges caused by the breach. they are also offering one year of free credit monitoring and identity theft protection.

if all this personal information is out there about you, it could be easy for anyone to steal your identity. they are saying this is now offered to anybody who shopped at target during the breach. the ceo commented in a statement today saying, i know this is frustrating for our guest that this information was taken, and we are truly sorry. the stock is only down one percent. a lot of analyst say there could have been bigger backlash. us how this happened. originally, they said it came through point-of-sale. could it be something different? is that aerstanding computer virus affected the point-of-sale devices, where you actually swipe your credit or debit card. that is according to a person familiar but has not actually been confirmed because the investigation is ongoing.

the u.s. secret service is currently investigating the breach along with two attorney general's. -- attorneys general. the film on the back of the credit cards is the same kind of technology you used to listen to cassette tapes in the 1980s. in europe, they have much more updated cards with chips and pin numbers. >> many security experts have told them it would be a lot easier if the united states switched to that, but that would be incredibly complicated, as we know. with all ofals this, including slipping sales, what is taking the company so long to figure out what happened and identify the hackers. from cleveland via skype. why did this take so long ago --

so long? we heard about 40 million in december. now we are hearing 70 million and we are not sure if those numbers overlap. why now? >> the company and ask what is called an incident response when -- enacts an incident response when something like this occurs. usually, that occurs within the first few days of a breach occurring. typenies can identify what of access has happened over a few days or a week or two. moret is releasing information of additional compromises. it is a somewhat sloppy approach to identifying where information was at. this is more than just a point- of-sale system now. you have the first name and last address, e-mail address, things like that were announced today. it looks like the hacker had

access to a large portion of targets network, which is really disastrous. >> ok, so if i shop at target, what am i to do? how do i find out if this affects me? first, cancel your credit card. call your bank. a lot of banks are reassuring credit cards now. call your bank and see if you can get a new card issued. that is the first piece. the second part is your identity. ifa hacker, what i would do i had this type of information is send an e-mail to you saying hey, i am from chase. your card was compromised. your fullu to send credit card number to make sure it has been compromised and then we will send you a new one. expect phishing attacks and individualng after

customers. it is going to be a rough time for users who shopped there. >> how do you think this happened? >> there are a few different ways it could have. i don't think the initial point of entry was the point-of-sale system. i know there has been talk around the point-of-sale systems, but i think it is more systemic than that. i think hackers roque through vs spearfishing -- broke through with spearfishing or some sort of attack on the corporate empire men. corporate- environment. gotuess is that the hackers a collection of information for individual people that shop at target and had access for a longer time. surprised if we do not learn that the breach actually happened a lot earlier than black friday.

>> how long were these hackers working on getting into the system, which obviously they were incredibly successful? >> yes. this is huge. this is one of the largest breaches we have seen in history. and the payday for this, 40 million cards or 70 million you each one is charged $10, that is still billions of dollars. they probably had access for a much longer time, which means more people have been compromised and what are being reported right now. >> this is seriously incredible. of course, we are going to continue to follow the story. david kennedy from cleveland. thank you so much for weighing in. well, facebook is ending its storiesrsial sponsored ads. what does that mean for privacy

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>> welcome back to "bloomberg west." i am emily chang. the obama administration is contractor main ip responsible for building the healthcare.gov website. cook has more. obviously, there have been so many problems with the website, but it is getting better. why change now? wakes the administrate -- >> the administration is still not happy with the way things are happening with the website or with the rollout october 1.

company that is a subsidiary of canada's biggest technology firm. it won the contract in 20 11 to be the main contractor for healthcare.gov, the front door, if you will. experience oned federal ip projects in the past and nothing as large as healthcare.gov. the contract is up in february. not a total surprise this is happening. the governor -- the government has turned the job over. they are not happy with how things played out with cgi. another company was brought in to manage the website as they try to fix things and that is where they stand right now. >> why accenture? >> accenture is another competitor of cgi that does not have a lot of federal ip experience, particularly in health care, but it does have

--ed areas with the biggest it does have experience with the ,iggest state exchanges including covered california. cover california has done well and has high enrollment. they have turned to accenture to try to duplicate that at the federal level. there are questions about the transition. this is going to go from one competitor to another. we have seen the problems so far with the website. accenture says there will be a smooth transition and consumers will not feel the change. >> how do you think this will play out on capitol hill? >> i think the controversy will continue and we will hear from front ofs at cgi in several panels to answer questions about what happened. is going torsy remain even if they are

switching contractors, but you can be sure that accenture executives at some point will face their own questions on capitol hill at well -- as well. >> where is the president on this? >> we have not heard directly from the president or the administration on this change, but the president is still busy trying to sell the health care law. he is having lunch with five -- you see pictures. he went to a local restaurant to meet with five young people who are helping to enroll other young americans. that is a critical part of this effort. there is a big push to get more young americans to sign up. the economics of this breaks down to the young invincible signing up. >> peter cook, our chief washington correspondent, thank you. facebook is dropping its trenton for seal -- its controversial

sponsored stories. privacy issues and users protested. they will be gone sometime in april. meanwhile, facebook seems to be taking a step forward protecting privacy. google is going a different direction. google users are complaining about a new hollis e that allows anyone to e-mail google user -- new policy that allows anyone to even if youe users do not have their e-mail address as long as you are on google plus. >> people want to reach you. youou are a gmail user and use google plus -- this is all about google needing to ramp up social networking. they have been so pioneering on the web, so successful with .dvertising they have not been very successful in terms of social network. blown away by facebook

and, to some degree, twitter. this is their way of saying we need to ramp up google plus, we have fallen behind. a lot of people feel this is really heavy handed. >> you can opt out, and i already did, so people will not be able to e-mail me, but don't you think this is sort of like taking users by force. recently required anyone who wanted to comment on a youtube video to sign up with google plus even if they didn't want to. >> exactly. the goal is not exactly the poster child for internet privacy. this is another way they're users.o upset the fact is, you're still going to have a lot of people feeling like, gosh, i really have to be a user of all these other google products in order to take advantage of this one. gmail has been very popular and

that has really taken off. so, yes, i think this is definitely going to wrangle more and more users in much the same way that facebook made people upset with the sponsored stories that they are scaling back on now. have you been scrolling through your news feed and seen an ad for something out of the complete blue and seen that a couple of your friends , really?nd wondered did she give facebook permission s this that so-and-so like product or this restaurant? it seems like facebook is being responsive, whether they were forced to or not. they are reacting against a curve that google will be up against soon. out, you do want to opt

you should be receiving an e- mail from google soon. i got mine this earning. make sure you look out for that. google buzz.me of they automatically signed up every gmail user for it and they ended up getting sign -- fined fcc and eventually shutting it down. could regulators look into this? >> i can tell you that any time use whath companies customers considered to be heavy-handed means to get you to adopt other products, that has, in the past, raise the hackles of regulators. they don't want the customer, whether the customer is a small business, big business, or just consumers like you and me, i don't want them to feel -- they don't want them to feel boxed in. we saw this with microsoft in the 1990s. any time you have companies like

google, facebook, twitter expanding on the web and saying if you want this, you have to use this, that could raise the alarm of regulators. rex we will be watching to see how this plays out. thank you as always for joining us here on bloomberg west. apparelp, nike unveils for this year's super bowl. we will hear from the creative director, next. and of course, watch a streaming on your phone, tablet and the new apple tv experience. ♪

>> nike has unveiled a new line of apparel and footwear for this year's super bowl. stephanie ruhle sat down with

creative director todd van horn. the nextvel of generation of athletes and their expectation of our product continues to grow. they get faster. they get stronger. they get more powerful. our insights to deliver that sets nike up for generation after generation. >> nike's new apparel will be especially important during this year's super bowl. -- van hornplained explained how nike is preparing athletes for the cold. >> we have a whole new range of innovations. it was a factor. it could be five degrees or it could be 50 degrees. i think providing those array of our breads and from an innovator standpoint gives us a lot more tools in the toolbox to deal with athlete needs.

this is the first outdoor super bowl in a long time. being in new york and having a potentially cold-weather game is very exciting for us. >> how far is nike taking innovation? the company actually looked outside the sport for help. role injohnson played a developing this new 3-d shoe. the markets.r on olivia sterns is in new york. andluctuating between gains losses after the very surprising jobs report we had this morning showing that payrolls in the u.s. only increased by 74,000 in the month of december. at the same time, the labor department revised up the month of different -- the month of november. the unemployment rate fell. one stock to highlight is tesla. upgrading its forecast

despite recent fires. the national consumer safety board give a five-star rating to the tesla s. ♪

>> this is the early edition of "bloomberg west." i am emily chang. top headlines, the u.s. unemployment rate dropped to 6.7% in december, the lowest it has been since october, 2000 eight. that low figure is in part because people are dropping out of the workforce. hiring also fell to its lowest a's in three years as -- lowest pace in three years. will nominate stanley fischer to be vice chairman of the federal reserve. he will replace net yellen,

who was nominated to be president. current fed governor jerome powell is being nominated for a second term. new security concerns arising ahead of next month's winter olympics. russia says it is hunting for suspects in the murder of six people in a region near where the games will be held. islamicon suspects militants of staging the killings. is expected to announce a series of changes to u.s. surveillance policies starting next week. phil mattingly joins us now. proposed that a third party hold millions of phone records collected by the nsa. how much is that going to cost? >> this is a big issue, emily, of as you said, it is part

46 proposals by the president's own task force in the wake of the idea is that the nsa should not be holding the data. it should go to a third-party or two from carriers. dianne diane feinstein, chairman of the intelligence committee, said that would cost the phone carriers as much as $60 million a year and open them to an enormous amount of liability. the administration is so kind of going through whether or not they are going to take this recommendation from the task force. the president mentioned it in his last news conference of 2013. major concerns for phone theiers is -- if administration decides to take this route. >> obviously silicon valley is very interested in what the president decides. are they going to be getting what they want out of this. google, yahoo!, facebook, all of these companies have protested the way these surveillance

measures have been carried out. >> extremely interested and very active. they have had meetings with the white house. they have put out their own proposals of what they would like to see. obama gives a wide- ranging speech on intelligence and for structure next friday. address hoping he will what they are looking for. those companies want to release reports about how often they are required to release information by the u.s. i think the administration is trying to figure out how they can find some type of middle ground. everything else, anything the administration does that is perceived by privacy advocates as a good thing will be in line with what they wanted. this is a revenue issue, particularly internationally.

>> how long do you think this debate is going to continue to play out? are we ever going to put this to rest? and lot of wildcards here, here is why. we know that there are around one point 9 million documents taken by edward snowden. those are in the hands of reporters all over the world. who knows what the next revelation is going to be? that is what keeps administration officials up the night. on capitolmajor move hill, a bipartisan move, to restrict nsa capabilities. just because the president gives a speech and starts to institute changes, that is knowing -- that is not going to stop that move either. you can bet that in 2014 edward snowden is going to stay in the news on a regular basis. that is not necessarily a good thing.

mattingly, our white house correspondent, thanks so much. as mentioned, the debate edward snowden started has caused a lot of backlash, especially in silicon valley. cory johnson sat down with elevation partner roger mcnamee to get his take on what is going on. he always has strong opinions. take a listen. >> it has been horrible for u.s. interests broadly defined. it is making it harder for companies to sell technology to our core trading partners because so many of them are angry at us. we have seen reports from cisco and others that the selling climate in europe has gotten much more difficult. it manifestly has created unnecessary internal conflict in country. >> you mean politically or atmospherically?

>> all of the above. >> if the nsa is trying to get on the market, so is google and facebook. >> the sad part of this is that for at least some time, they have lost the cooperation of silicon valley. there was a time 15 years ago that the central intelligence agency created a venture fund in .he valley it was a very successful effort to get silicon valley to cooperate with national security. now that you're discovering blatant, a legal grabbing of absolutely everything everywhere, i think that -- a legal grabbing of absolutely everything everywhere, --

illegal grabbing of absolutely everything everywhere, that has upset people. myget verizon, because in mind, they are a carrier which means, what goes through their pipes, they don't care about. they just care about the money that comes in. the cia is just another customer. you do they carry out go if are google, apple or amazon and your entire value is in your customer database and these guys are poking through it all the time, they were not going through the records that verizon they were for sure going through the google and apple e-mail stuff that way. i look at that and i go, for what? the problem here is really simple. it is mathematically impossible to process data in a timely

basis. malcolm gladwell wrote a book come code that had a great insight. there is such a thing -- called blink. it had a great insight. there is such a thing as too much information. when you have much noise, it quality of your decision-making. this is an administrate -- this missedrganization that -- iraq.sed a rack gathering all the information in the world is not only not going , i am sure iter will make us less safe. the haystack they are pulling the needle from is that much bigger. and the 10 tatian to do temptation to do

political, chris christie like things with that data is overpowering. i would like to look at bill gates tax return or mark zuckerberg's tax return. they say they have disciplined people who have done that which, by definition, means people have artie done that. >> look at what the fbi did with martin luther king and the civil rights movement. these people were in theory protecting us. from what? >> that was elevation partners roger mcnamee. we just found out the president will be giving a speech about on january 17. we will, of course, be covering that speech. coming up, tech him pennies like dropbox and aly baba are expected to go -- tech companies are drop box and aly baba expected to go public this year.

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>> welcome back. i am emily chang. last year saw the most companies go public since the year two thousand according to data from renaissance capital. more than five he -- more than 45 of those were tech related. we look at when we look at companies going public this year? i want to welcome them the chairman of -- welcome the chairman of stage works. many companies went public last year, what are the at for you are looking this year? >> here's the thing. the ipo market runs parallel with the stock market. we expect there will be a bunch of folks who want to get money now in the new year. a think it is going to be

boon. >> can you give me a number? >> may be between 25-35. it will be good. >> and you are talking about tech ipos specifically? >> yes. in particulares that you are looking at? we have heard air b&b, dropbox, go go. mentioned aly babb the -- alibaba. they have good things, revenue growth and profitability. we hope they go public. companies that went public last year were not necessarily dogs, but they did fundamental performance overall. we believe they were overinflated. hopefully, some good companies will go public that can justify the valuation. >> how do you define good? >> the old-fashioned way.

revenue growth, positive cash flow, profits, profit margins, a , and last and very importantly, they are valued within the realm of the universe, meaning they are not so overinflated that people who -- come in can get a reasonable value. >> twitter does not have a profit. a do however make money. does twitter not count as good? >> in a bull market, everyone looks smart, so i am going to dodge the question a little bit. the thing about twitter. they came out at 98 times trailing revenue. in order to justify just their to rise, they would have generate 70% sales growth for 10 years. i am not saying the company is bad, but if you look at the way you should value companies,

which is cash flow in the future discounted to today, they are way over valued, even today. if you got in at 26 and you are at the d seven, you look smart, but i would say that is large you -- and you are at 57, you look smart, but i would say that is largely attributable to the bull market. do you see twitter settling? >> i don't know and i don't want to evade the question, but i have to tell you, not to be a cynic, i was shocked at where they won out when they went public, let alone where they are now. now remember, the music is going, people are in their chairs running around when they are going public. but when the music stops and the economy slows down, which it always does, those companies tend to plummet in value. is going toing that

happen, but evaluation is very important. i see wall street getting a little greedy on the price. they are still overpriced, according to me. >> brian hamilton, i appreciate andbeing straightforward even telling me when you are to dodge a question. thank you. "house ofbreakout hit cards" comes back next month. we will explain why the next season will look a lot better. >> democracy is so overrated. ♪

>> welcome back. i am emily chang. "house of cards" comes back next month for a second season. how much better will it be if you can watch it in ultra hd? take a listen.

have the best tv watching experience netflix can offer. you might be surprised. why is an internet tv company concerned about the best heckscher? that is the ultimate irony. -- best picture? that is the ultimate irony. the first place you can see this is not on dvd. it is on netflix, streaming over the internet. >> lions this experience going to look and feel different? front of standing in the only tv in las vegas that can stream altra hd. you get an idea of what this looks like. house of cards is the first thing we have in this format. on the screen, it says altra hd four k. superrealistic

experience. are practically in washington, d.c. look at all the glorious colonial architecture of the capitol building. you can see what is going on. you can see all of the columns. and buy one oft these fancy tvs? percentll be as small of users at first. the prices will come down and get more affordable in the years to come. think of netflix as a service that is available anywhere on any device. are the majority of netflix subscribers adding down in front of the couch and watching on a big-screen tv? usehe majority of netflix right now is on a tv in your living room. sure, tablets are growing. mobile is growing, but the number one way to watch tv is on

your couch. >> tied yellen of netflix. we will be right back. ♪

>> welcome back to "bloomberg west." i am emily chang. coming up at 3:00 p.m. pacific and 6:00 p.m. eastern, how could president obama change the nsa? we will be speaking to a former nsa employee about the administration's struggle to balance privacy and security. remember, we are expecting a speech on the nsa from the president on january 17. the hour which means we are on the markets. >> payrolls in december rose at the slowest pace in nearly three

years. only 74,000 jobs were added. the unemployment rate falling to 6.7%. that is a five-year low. instant reaction to the report and insight on what it could mean for fed policy. , and is very surprising puzzling and worry some. revisionsu add in the from last month, you still have half of what consensus was. it is inconsistent with other data. it is also worrisome, because if we look within the report, are back to levels of labor participation we have not seen since every 17. but long-term unemployment is still seven percent. what is the impact of the weather? how much of this is real?

iss reflects an economy that still trying to gain enough momentum, an economy that is still stuck somewhere between second and third gear. it can rise to a much higher .peed -- weeminds the markets believe they will continue to taper and by the end of 2014 the fed will be out of the qe business. what it reminds the markets that they had forgotten in the last few weeks is that the fed is unlikely to hike rates in 2015. it is more likely to be in 2016. this suggests certainly that they may wait until the march meeting to decide.

there is plenty of time to observe these trends. bear in mind, these adjustments are difficult in december. it is going to be worse in january because you do not have the holiday shopping. you kind of want to take the numbers with a grain of salt. they do get revised. >> and here is what the white house had to say. month when the numbers are good or the numbers are less than expected, i do the same thing and look back over the last three months, 12 months, 46 months. all of those tell the same story. two point 2 million private- sector jobs added over the last 12 months. this is a recovery that is continuing, that is going to be volatile from month to month, but you are seeing an economy that overall continues to strengthen. >> now let's take a look at what is happening in the markets. slightly' lower.

appears toeport signal the economy may not be as strong as many had thought. we will be back with more in 30 minutes. "money moves" is up next. ♪ we will tell you how that could affect the case against the former hedge fund. one billion dollars in investment capital is what my next guest has deployed. will