live from pier 3 in san francisco, welcome to the late edition of "bloomberg west," where we cover the global technology and media companies that are reshaping our world. i'm emily chang. our focus is on innovation, technology, and the future of business. a big shakeup at yahoo!. the coo joined in 2012. he is already out. this is a big surprise. >> an old colleague of marissa mayer. they worked together. it was a big higher. -- marissa mayer made it clear this was her

choice. i want to read this statement. during my own recollection, she says, i made a difficult decision than our coo should leave the company. i appreciate his contributions and wish him the best in his future endeavors. and makes you wonder what happened. she did know what she was getting. today have to do with the personalities? does that have to do with the numbers? >> the numbers do not help the situation. the ad revenue has been down year-over-year. the share is down to five percent this year from 5.8%. google andike facebook have seen their fair share increase. something was not clicking. i will give her points for calling it like she see that. sometimes you see reorganization. maybe the guy goes to lead innovation or something. >> creative differences. >> she is admitting that it was the wrong decision. moving on. >> that is to her credit.

what might be to her or the board's demerit is what he is walking away with. 14 months on the job. >> get this. >> $109 million. >> he is making $109 million for 14 months on the job. this is what he paid -- they paid him to leave google. >> even though he will not work there anymore. i want this deal. >> whose responsibility is this? how to the board allow this to happen? >> it is clear the marissa mayer's is making expensive acquisitions. she has done this before. >> she has been very focused on talent. it has been one of her top priorities. >> it should be. to attract these people, they have been paying a lot of money.

it makes you wonder if that is the right way to do it. >> to your point, where's the board on all of this? we have seen a little bit of this and aol. as far as deals and patch with tim armstrong. where's the board on all of that? are they here? it is a question that remains to be answered. >> she is also doing some reorganization. mediaave a new leader for and editorial. some of the coo response abilities will go to mike kearns. some people are reporting directly to her. >> there is good energy a yahoo! right now. people who are working their, they seem to have high brow. morale. are they moving quickly but not necessarily intelligently? >> former microsoft coo is here.

thank you for joining us from phoenix, bob. what do you think went wrong? is it a personality thing or does it have to do with the numbers not looking good? >> i think there is a realization that things are not theirosy in regard to fundamental business. if you look at that display revenue being down seven percent, 31% of their revenue comes from a microsoft supplying the search engine. most of their market value is in alibaba stock, part of the market cap is in that stock. they are in a lot of trouble. they're really struggling. the issue is the core model. what is their contribution to the technology arena today? it is a dated company. they have not resurrected it. >> has part of the question here -- yahoo! is not very clear

about what they are. >> exactly. >> it is more like a collection thick of things than anyone mission. >> that is exactly right. their finance site is good. there are many other alternatives. there are alternatives in this world and that is why they are floundering. >> how do they reflect on murtha meyer? she is making this decision very public. she has made attractive -- attracting top talent her focus. it is good tot hire top-notch people. we are waiting for the leader to put a new business model out on the table. she needs to create excitement for yahoo!. the buck stops with her. this person may make everybody feel better in terms

of creating some energy around it, that the fact is -- where is the new business model? where is will take them back from the doldrums to something exciting? >> let's move the focus more broadly to the valley in general. is $109eel like there million for 14 months of not good work -- is this indicative of a race for talent that has gotten out of hand? people are throwing around money and it needs to come back down to earth a little bit? [audio deleted] >> i could not agree more. i kind of trick is something that you would've expected on wall street. not out of silicon valley. on them usually count doing is coming up with some ingenious idea from surprising people. it is not hiring all-stars.

the person who suddenly stumbles on something. there is a culture that enables achievea to grow and some notoriety. it is a sad tale for yahoo!. >> you said that this is not what silicon valley is about. it sounds like professional sports, where you wind up with a player on your roster. more like an allan houston, james dolan situation. pilere stuck with this big of money. it seems like this cannot continue. >> absolutely right. this is not the way to do it. we need some ingenious thinking. i do not think you will higher all-stars for musso to speak. the supply of that -- you get good talented people. they need to find some magic here. move to the next level in terms

of what they offer the public area >> baseball needs to have some changes too. what about the acquisition spree? marissa mayer has been buying these companies. is that the right way to go? a lot of these companies are defined, not doing well. this is about bringing in new blood and new talent. if youell you the truth, look across the acquisitions that go on in the industry, acquisitions are tough. rarely do they really represent the powerhouse behind the engine, so to speak. that will drive you to the next level. some of these are solid. they are good acquisitions in some cases. in others, you scratch your head. usually, the batting average is not that high. >> all right. we will talk with you more after the break.

we will talk about microsoft and their ceo search. will tellidate -- we you more about him coming up. ♪

>> welcome back. i am emily chang. i'm here with sam robards. we're talking about the search for a ceo at microsoft. a new candidate has been put into the mix. that is the ceo of ericsson and company, based in sweden. i went to bring in at our senior west coast correspondent. jon erlichman, what can you tell us? >> when people read this story and saw hans vestberg, who is that? what is going on with the ceo search? on paper, this actually makes some sense. they operate in a ton of different countries. a company that deals

with consumer side and business side. microsoft is doing that as well. they have a history of telecommunications and mobile. microsoft is trying to think about mobile. those are a few of the reasons. and he plays handball. >> the thing is, he has been in ericsson for so many years. he has been around the world and worked in different departments. what makes him qualified to run microsoft? the company has a lot of work to do. >> he has worked in every part of ericsson except rmb. that is a huge company. >> i want to bring in bob herbold, the former ceo of. you have been watching this from afar. what do you think of hans vestberg and the other candidates that have been thrown out there? sam, be clear, emily and it has been a wild since i have been a microsoft. it was the 1990's when i operated there is the coo. it is a company that i follow

closely. it is a great company and has a bunch of powerful franchises that -- some struggle. others have been powers of strength -- towers of strength for some decades. this job is tough. i'm glad the board is taking their time. it is terrific that they're coming up with candidates that are a bit different. best bird represents that kind of candidate. who knows. who knows where it will take us from here. they are doing their job and taking their time. hopefully they end up with a great candidate to run a great company. doing a bit more research on hans vestberg. some video ofund him speaking about himself on ericson. -- on the ericsson website. we want to learn a bit more about him. >> i think that motivation is

what drives me. the motivation to be in a company working in the industry with employees and customers. that is driving me. >> you know a bit more about hans. >> what is interesting about hans vestberg is that he has been at ericsson were quite some time. a time insided over their history where they have moved away from consumer products. they used to have a partnership with sony to build smart phones and cell phones. that has been unwound. i am just curious about your thoughts -- jon, feel free to jump in. microsoft is in a crossroads with its consumer business and the enterprises. what does the consideration of someone like vestberg mean for those tensions in the company? >> that is an important point. people often do not realize, but the real engine for microsoft is the industrial side.

largerelationships with and medium-sized organizations, providing the kinds of tools that they have for decades. that is the heart of the business. it is one that must be protected. microsoft has a good top of that. there are consumer activities that could help. they are powerful forces. they need to manage both very well. if you take another company the blackberry, i think that they forgot about the fact that the industrial part was the heart and soul of their business. they tried to act a bit too much like a consumer product. they did not do a good job of managing the two sides of the street, so to speak. both sides are very important for microsoft. do not forget the industrial side. >> i want to bring you back into this. there are a lot of other candidates out there.

tell us about the status of the search more broadly. who is runningr said they want to make a decision and the early part of this year. what progress have they made toward truly narrowing it down? to answer that question, i would say that one of the biggest challenges they have faced in this search -- we have for this from a lot of people. they have reached out to some big names, if you will. steve ballmer laid out the strategy. he did it in the head and organization. if you are the visionary coming in to say i am to do something different, is steve ballmer going to be happy about that? is bill gates on board? that is one of the biggest challenge of getting this nailed down. the can of do have an opposition? that is one of the factors that will affect this. >> all right, jon erlichman and bob herbold, and she so much for joining us.

this is something we will continue to watch. we have got until june. we softly. coming up, everyone is talking about smart cars and smart thermostats. does anyone want to use them? we will talk about that with survey monkey. ♪

>> welcome back. we're talking about connecting cars and thermostats and homes. a lot of things. do people want their coffee makers to talk to them? >> sometimes industry is ahead of consumers. >> i have people talking to me at work all day long. maybe i don't want my coffee pot to. in a survey people

monkey shakedown. here to talk with us about the results is their ceo, with us from san francisco. do customers and consumers really want that's? today one connected cars and homes? >> i think that people do want this. i do not exactly know what it means when they get to the reality of it. it looks kind of confusing and expensive, except in places where they have adjusted to it. it is like the jetsons in what we imagine and science fiction, like the movie "her." there's the reality of it, and the reality has not caught up with fiction. a few weeks ago, and coming out of ces, you see reality and fiction merging. i'm curious to see, from your thearch, what have been

obstacles that people feel toward something like a connected home? what is the main reason they don't want it? >> some of the biggest of the came through is that people felt notas too expensive or worth the investment. i think that when you really get to the connected homes, they are a large investment. where people are tinkering is around the edges. said is that the most smart device they have as their television. some of the televisions you can talk to. there is stuff that is starting to get there. the rest of the home is not there yet. people did say they wanted in their kitchen. that is interesting. complexity and cost and all those things -- it is not like you walk into an apple store and buy this thing and set it up and away you go.

entertainment, we have gotten there to some degree with streaming music and on-demand videos. the rest of the home is pretty untouched. >> it is interesting to see where this is going to go. you have some big companies trying to make a push there. samsung announced their smart home initiative. make attitude is that they smart, they also make refrigerators. there may be some connections they can make easily. if you happen to own both products, look what you can do. >> google is moving into this territory. earlier this week, the thermostat. where you see this going? headed there.re we will see individual devices -- to be fair, we had smart coffee makers for a lifetime. people pretended not to use them. they have not been connected with everything in the house. we're getting there. are an interesting

device. it was the second most popular thing that people have in their home. it was only seven percent. systemse a lot of smart that are connected to the home. but after that, it really drops off. you follow the technology landscape very closely. what is your feeling here? going to bechnology accessible and affordable and ready for prime time? to regular people? >> i think it will be quite some time. i think we are talking about 10 years before people are really adjusted to this. it is a normal thing when you walk into someone's house and a lot of these connected smart devices are there. we're just at the early stages of that. >> do you feel, based on your research, you were looking at cars. is that a place that might happen more quickly? >> yes. i think ours are happening more quickly. you turn over your car more

frequently than your house. people have smart things in their car. 10% of people have the ability to download apps into their car already. car manufacturers are seeing that when they put this technology into their cars, they sell better. we are seeing more and more. thatof the data shows people want to have an ios or android platform in their car. i was staggering to me. 17% wanted to have that platform. people are starting to get comfortable with it in their car. >> all right. thank you. as always, thank you for joining us on breaking it down. coming up, we will continue our artificial intelligence series. ♪ is 26 after the hour, which means we are on the markets. i am olivia sterns. let's get you caught up. stocks are moving a little bit lower.

we pulled off lows and the nasdaq. one stock we want to talk about in trading. china is investigating and saying it is alleged to be illegal. more the markets in 30 minutes.

best buy shares are falling 11% today. that is the most after they've reported a drop in holiday season sales. they offered very deep discounts. --y also say that first fourth quarter profit is lower than last year. tom wheeler says that he intends to fight this week's court ruling, tossing out the new rule. appealcludes a possible under a different framework. neutrality requires internet providers to treat all traffic

equally. china has a new richest man. baidu'shas overtaken robin li. his fortune is valued at $13 billion. he has shares in search. -- surge. they may challenge alibaba. now to ai, beyond robots. we have talked about how artificial intelligence is going to dramatically change the way we live. head ofd about the facebook. we have somebody coming from microsoft. he nearly as the head of their research and he joins us now from redmond, washington. you are in charge of more than 1000 research labs around the world. what kind of thing are you focusing on? >> we are really covering a huge

array of things. almost anything you could imagine in computing research and other parts of math, physics, computer science. now, really onht point for this segment, is artificial intelligence. we have been very focused. it is our largest investment area right now. >> one of the things you're working on is a virtual assistant. what could he or she do? isone way to think about it -- they try to answer questions and figure things out. one type of question is to figure out what questions? or ifid that person say you see a picture, what is in that picture or video? another kind of question that is challenging is to answer the why questions? why does this person want to see a certain person for

an appointment? why did this person asked these questions? understand the intention of people. that is the basic subject of this personal assistant project. >> we are looking at the footage of what you have been working on. in the case of this virtual assistant, i noticed that you have a male figure on screen. from an interface standpoint, how do you choose what the administrator should look like? system, as we the have it set up, you can choose what kind of avatar you want. some people choose males and some choose females. that isy is something part of the research. we're trying to understand how people relate to these kinds of systems. what kind of symbiosis or can management make. consider hiring

scarlett johansson? [laughter] i'm going to give that to you. that is a gift. do with it what you want. >> peter, what about the other stuff you're working on? >> i have always wanted my dog as my assistant. >> excellent idea. >> to each his own. it is all about customization. her salvation. speaking of personalization, you are also working on a smart elevator. is this an elevator that would know what for you want to go to? how does this work? >> right. this is pretty cool. we set up a bunch of sensors. in front of elevators. without any programming, we just had an ai system that watched what people did. for about three months. over the three months, the

system started to learn, this is how people behave when they want to enter an elevator. this is the type of person that wants to go to the third floor as opposed to the fourth floor. after that training. period, we switched off the learning period and said go ahead and control the leaders. ,ithout any programming at all the system was able to understand people's intentions and act on their behalf. there is a general theme that we have in the labs. today, people talk about operating a computer. you sit down in front of a desk at the computer and operated. you take the computer out of your pocket and operate it. in the future, you will not operate computers, but they will work on your behalf. this elevator project is one expression of that idea. this forone second.on the idea is one second. that the elevator

system would learn my habits. perhaps at some time they are going out for lunch and another time i'm going to meet with somebody. how does that break down? you can imagine a connected world. in the future, the sensors inund you, on your body, your environment, start to understand your physicality and what you're saying and what your teens are. even what your plans are. we have seen that with the virtual assistant. somehow the virtual assistant is understanding that eric is not in the office right now. we think he will be back in three minutes. sit still and i am sure you can meet with him. that kind of ability to predict people's intentions and what might happen next, and the same way that people do, those are things that we think will be built in very deeply in the environment all around us. knows -- if your

environment knows, for example, that it is lunchtime. you had spoken about having lunch with a colleague on the second floor. benotices that you seem to leaving your office to go to the elevator, the elevator can be smart enough to take you, without your need to operate anything. -- this isa calling a question that i spoke about at nyu. do you ever feel like the technology exceeds our comfort level? there is a tension there as to how quickly you could implement some of these things? you might be able to, but it would freak us out. when we are having a few laughs in the hallway, sometimes we make a joke about skynet. in fact, the same kind of intelligence ultimately will have to be brought to bear to understand what are the boundaries. what is proper and improper?

that will help to protect people's privacy, if that is a concern. what to understand exactly kinds of things may or may not be appropriate to share. to give you an example, in the project, the system actually is incapable of seeing people's faces. it is just looking at the motions of people in the hallway. it does not understand their identities. it is still able to learn exactly what people's intentions are. we are seeing these patterns emerge over and over again. right now, it is incredibly surprising. we are able to look at english words that people type into things. we can look at the letters, three letters and we are able to hot is the same as warm.

both of them are related to burn, and so on. >> fascinating stuff. it will be interesting to see how this plays out. how this ends up in the products. hank you for joining us today. oscar nominations are out today. got some not. 2" big movie in the grove art household. >> we are very excited today. >> we will talk to the guy behind it next. ♪

>> welcome back. i am emily chang. a big day today. oscar nods her out. we will bring in jon erlichman and l.a., watching at all. any surprises this year? >> always some surprises. it is wide enough that people can have a smile. you pick the best picture category. there are nine potential winners. everybody has a great spin a

story. sony has a couple of nods. "american hostile" is one. paramount has a couple of knots. ise wolf of wall street" one. beginning of the golden globes, we were talking about netflix and its success. they have made their way into the oscar conversation. they have a documentary last basically november, that is in the category for best documentary. it is old media, new media, everybody is happy in l.a. >> netflix is celebrating. somebody else is the guy behind ," nominatedme 2 for best animated film and best song. the founderated by and ceo of a limitation. sam grobart --

>> i have been waiting all day. this movie runs on a continuous loop in my house. we have been to the theater many times. congratulations. a bit of ato be duopoly as far as feature-length animation. you had pixar and dreamworks. you guys have broken through. how does it feel to be a part of that upper echelon at the top of mount olympus? >> it feels fantastic, especially today. it is the day which, needless to say, fills me with pride. for the entire team. from the directors to my fellow producer. it is an extraordinary day. it is great company to join. >> i want ask you a question. one of the interesting things about your company and the work you do is that there is a connection back to france. is that correct? can you tell us about that relationship?

>> yes. our films are made between los angeles and paris. the genesis of that is when i started the company, about 6.5 years ago, the competition for artists in the united states was so fierce that i could not gather a level of world-class artists and attract them to my company. i had to look elsewhere. france has this magnificent tradition of animation. we ended up making the first film in france. we have made every film since then in france. the smallw acquired company that we were working with. they are now elimination -- illumination mcguff. -- awards arean

great and they are exciting. behind the scenes, this is an absolutely tough business. to look at what has happened the "despicable me 2," budget was under $100 million. it has generated more than $935 million in the global box office. explain to us. what is the recipe and how do you make a profitable movie? -- i have been at 20th century fox prior to forming a limitation with nbc universal. withve had good success the ice age films and a number of other films as well. the premise when i started this for ay was to make films reasonable budget. a budget that would allow us to exercise more creative freedom. marketplace, my

premise was that we would have to embrace risk in order to break through the clutter of all of the other movies that would be released. that is approximately how many films are released each year. a containedt economic model would allow for creative freedom with a thesis. it turned out that the thesis was true. me" ismple, "despicable not your typical animated film. your protagonist is a nasty villain. to make a film called that is animated for a family audience is an unusual and somewhat subversive choice. fortunately, really, because of the talents of the individuals who work with me, my writers and directors sent the 400 artists

and production personnel, the thesis was proven true. >> you mentioned other movies. what other movies out there argue looking at? what are your favorites? are a lot that there of good works being done. at a time when people frequently complain about whether or not hollywood is taking enough chances. the range of films this year and i see a lot of films that really, there is extraordinary work. it is a strong crop of films in our own category. otherside-by-side with is a great honor. aboutone who has thought being animation, they would cherish that. i look across live-action film and i see great work in films

ranging from "american hostile" to "12 years a slave" to "gravity." this is extraordinary filmmaking. and extraordinary filmmaking that pushes the boundaries of safety. in order to compete with all of the other platforms and forms of trying to are also attract the same i've also we are. manygratified to see so filmmakers and studios and independent companies really pushing themselves to take risks and make exciting films. >> founder and ceo of it eliminates an entertainment, congratulations on your nomination. thank you for joining us today. jon erlichman, thank you as well. coming up, i am excited about the story. the famous founders, including apple. ♪

>> welcome back. it is time for -- >> the byte. >> you know how we roll. jon erlichman has this for us. ago, a little club got started in silicon valley. moving forward with its incredible career. here's the back story. the iphone and imac or even a windows pc, members of a homebrewed computer club, steve jobs among them, gathered every other week. garage, later on the campus of stanford university. >> it was the social media of its day. >> he was one of the organizers. >> not all of us have the same impact. cannot get far into the

history of homebrew without running into the meteor or cries of apple. 38 years after it started, steve wozniak is getting rock star treatment at the first reunion in years. >> everybody in the club talk to me and said those ideas inspired me. what should go into a computer? i wanted to be a part of the so bad. >> he was a homebrew regular and had a computer store. and wozniak,jobs he invited jobs to his store the next day. >> he came in and i told him that if he would assemble and test the apple one computer, i would buy 50 of them. >> the price? 500 dollars apiece. it was their first deal. it landed than $25,000. >> that was basically their seed capital. >> while they often get the

credit for ushering in the pc era, while smack high praise for the entire club. skilled ate very having ideas and turning it into a device. these were the intellectuals that i admired, the people that thought about society being different. club obviously had a huge impact on the world of technology. how big was the turnout at this reunion that just happened? >> it was 150 people. it was a good crowd. people like talking to woz. it is fun. they had a good time. >> what was the dynamic there? is woz and idle to these people? or was it all about steve? speak the same language. they are excited to hear from him. maybe in some ways they are different from what we are curious about. you go back to the early days and what they would talk about

in this club. they would be talking about their same world of thinkers. though gates would come up that these meetings the way that bill gates would come up in the boardroom conversations of technology companies. that was before anybody knew who he was. he was just doing cool stuff and cool coding. he was up in seattle doing work on pcs. this is where they would talk about the future movers and shakers. interesting stuff going on back then. >> doesn't this illustrate the changes in silicon valley? going from hobbyists to multimillionaires? you really can see the difference. >> right. everyone is talking about it on twitter and social media. >> talking about what we would like to see, that was a roomful of men. >> how about some ladies? >> more girls are learning how to code. thank you all for watching us today. we will see you back here tomorrow. ♪

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lex welcome to "money moves" were we focus on alternative assets. we show you what investors and entrepreneurs are doing as well as what's going on and hedge funds, private equity and more. pizza and private equity -- apollo global taking over chuck cheese. by the children's chain agreed to be bought. carlyle by a unit of johnson & johnson for more than $4 billion. we will tell you it's in