>> "bloomberg west welcome to" where we cover -- welcome to "bloomberg west" where we cover the technology of the changing your world. alreadyin fall 2012 and out at yahoo!. collects an old colleague of yahoo! ceo marissa mayer. they worked together for a long time. he was a big higher and so long. -- a big hire. >> i want to read a quick statement from this. it has been a widely reported memo. i made it difficult decision that the coo should leave and i ique'siate henr

contributions and wish them the best. it has to do with personality and the numbers. >> the numbers don't help the situation do they? they have been down year-over- year and the share of the ad 5.8%t is down to 5% from while google and facebook have seen their shares increase. clearly something was not clicking. i will give props for it doing it as she sees. like sometimes you see creative differences with the bands. >> to her credit, she was admitting it was the wrong decision and moving on. >> what might be to her, or the demerit is what he's walking away with.

14 months on the job -- $109 m illion. >> 109 million dollars for 14 months on the job, severance for yahoo!, his bonus, salary, stock . >> continuing to get paid even though he does not work there anymore. >> had to the board allow it to happen? -- how did the board allow it to happen? >> she has made some very expensive acquisitions like tumblr. >> she's been very focused on talent. it's been a top priority. >> as well it should be. >> in order to attract these people, they've been paying a lot of money. is it really the right way to do it? >> where is the board on all of this? we see a little of it at aol

tim armstrong. where's the board on all of that? where are they in the case of yahoo!? it's a question that remains to be answered. this,hy will be running thethey are splitting up responsibilities. >> no question there's a lot of good energy. mood seemsing there, high but this makes you wonder if what's going on and if they are moving very quickly but not necessarily always intelligently. oins user microsoft coo j now. thanks, bob, joining us from phoenix. is this a personality thing or doesn't have to deal with the

numbers just not looking good? thatere is a realization things are not that rosy in regards to their fundamental business. if you look at the display revenue being down 7%. 31% comes from microsoft supplying the search engine. most of the market value is in alibaba stock. $36 billion of the market value is from that stock. they are in a lot of trouble. they are really struggling. the issue is the four model. what is their contribution to technology today? they have not resurrected it. >> bob, is yahoo! is not clear to me what yahoo! is. it's more like a collection of things instead of any one.

>> that's exactly right. the finance site, it's decent. sports is good. it's fine. there are many other alternatives and they are just not distinctive in today's world. that is why they are just floundering. >> how do you think this reflects on marissa mayer? making this decision very publicly, she has made partcting top talent a big of her focus. how does this reflect? >> it's good to hire top-notch forle, but we are waiting the leader to put a new business model out on the table to create some real excitement. yes, firing this person may make people feel better in terms of creating energy around it. model? the new business

where is the sizzle that will take this company back from the doldrums and do something exciting? >> let me ask you a question moving more broadly to the valley in general. million for only 14 months, not very good work. this a race for talent that maybe has gotten out of hand? it needs to somehow come back down to earth a little bit? >> i cannot agree more. that kind of trick is something you would expect out of wall valley, to silicon tell you the truth. when you usually count on them doing is some ingenious ideas on surprising people. it is not hiring the all-stars that get it. it is the person who suddenly stumbles on something and you have a culture that enables that

idea to grow and achieve some notoriety and impact. it's a sad tale for yahoo!. like wall street and it sounds a bit like professional sports when you wind up with a player on your roster and you are stuck with this big pile of money. >> we need some ingenious thinking. i don't think you're going to hire all-stars as a supply of that. they need to look at what they offer in terms of the public. are anyese changes indication, what about the

acquisition spree? wallabies companies marissa mayer has been buy-in. is that the way to go? -- all of these companies she's ing, is it about bringing in new blood? >> if you look across all of the acquisitions that the one 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 acquisition. other cases, use track -- you scratch your head. usually the batting average is not that high, to tell you the truth. >> we will talk a little bit more after the break about microsoft and the search for a new candidate. we will tell you little bit more about him coming up. ♪

>> welcome back to "bloomberg west." i'm emily west here with sam grobart. a new candidate has been thrown into the mix at microsoft and that is hans vestberg. i want to bring you jon erlichman who helped break the story. what can you tell us? >> i'm sure when people read this, they thought, who is that? what's going on with this ceo search? on paper, it makes sense. erickson operates and tons of

countries. they deal with the consumer, business, enterprise. they also have a history and telecommunications and microsoft is trying to think about mobile. these are a few of the reasons. plus he plays handball. erickson for so many years. he's worked in a lot of different departments. what makes him qualified to run microsoft, the company that has a lot of work to do? >> he's worked at every part of erickson except for r&d. herboldt to bring bob back in the conversation. what do you think of hans vest berg and some of the other candidates out there? >> just to be clear, it's been a while since i've been at microsoft. it was the 1990's when i was the coo. the company that i follow

closely. they've got a bunch of really powerful franchises that struggle and others have been great for decades. tilling the job is tough and i'm glad they are taking their time. it's terrific they're coming up with candidates that are a bit different. he surely represents that kind of candidate and who knows where it will go from here, but they are doing their job. they are taking their time. hopefully they end up with a great candidate to run the great company. >> we've been doing a bit more hans vestberg. i wanted you to take a listen to this so we can learn a bit more about him. i think that motivation is

what is driving me. motivation to work in the industry with the employees and customers that drive it. >> sam, you know a bit more about him. >> what's interesting about them is he's been at erickson for quite some time and he has presided over a time in the history where it has moved away from consumer product. they used to have a partnership with sony but that has been unwound. bob, i'm curious about your free to, and jon, feel jump into. they are ready crossroads when it comes to the difference enterprise.umer and what does the consideration of someone like vestberg mean for the contentions in the company? >> that's a very important point. the real engine with microsoft is the industrial side, so to

speak. the relationships with origin medium-sized organizations providing the kinds of powerful tools they have for decades now is the heart of the business. it is one that must be protected well and i think microsoft has .one a good job of that on the other hand, there are consumer activities they could not help but get into that are powerful forces. they need to manage both very well. if you take another company like the blackberry folks, rim. and forgot it was the heart soul of their business and they tried to act too much like a consumer product. they did not do a good job managing both sides of the street, so to speak. don't forget that industrial side.

>> the board member running this is they want to make a decision in the early part of this year. what is going to truly narrow it down? >> one of the biggest challenges they have faced in this search, they have reached out to some .ig names, if you will steve ballmer laid out the strategy. if you are the visionary coming in to say you're going to do something different, is steve ballmer going to be happy about that? that is one of the biggest challenges in getting all of this nailed down. what kind of power do you have in this? that's one of the factors that has been slowing this down. jon erlichman and bob herbold, former coo of microsoft, thank you for joining us on "bloomberg west."

we have until june. we shall see. coming up, everyone is talking about smart cars, but do consumers actually want to use them? we will talk about that with survey monkey next. ♪

>> welcome back to "bloomberg west." i'm emily chang. we are talking about connected thermostats and homes. do people actually want their coffee maker to talk to them you ? like it nice and quiet, thank you very much. thanks we asked more than 760 in the survey monkey shakedown.

david goldberg is with us from san francisco. do they really want this? do they want connect did cars, a connect at home? do. think people they don't know what it means when they get to the reality of it and it looks kind of confusing and expensive except for places where they have gotten adjusted to it. jetsons ande the what we imagined in science fiction or the movie "her," imputed is in our home and then there is the reality of it. computers in our home. >> i saw "her" a few weeks ago and now coming out of ces and these demonstrated homes, you see a little bit of reality and fiction merging. haveurious to know what been some of the obstacles that

people feel something towards a connected home? why do they feel they do not want it? people felt it was too expensive or not worth the investment. when you really get to what we look at connected homes, they are a very large investment. some of the televisions you can talk to. there is stuff around entertainment starting to get there. they say they want it in the kitchen, which i think is interesting. complexity caused all of those things. don't just walk into the apple store, set it up and away

you go. on demand, the rest of it is still pretty untouched. >> obviously you have some differences. they announce the smart home initiative. we also make refrigerators. we just look at what you are able to do. >> and google is moving into this. where do you see this going? >> we're going to see individual devices. we had smart hockey makers for a long time and people tended not to use them. they had not been connected with everything in the house. i think the nest device is and it wasresting

only 7% so there are a lot of smart hvac systems in the home. after that, it really drops off. >> when is this kind of technology going to be accessible, affordable, ready for prime time to regular people? >> it will be 10 years. of at the very end of it. >> we're also looking at cars. will that happen more quickly? car more over your

quickly than your house. my, i have smart things in car. they also have the ability to download apps into the car and they are seeing where they put the technology and the cars that they sell better. it was about 27% that wanted to have the platform. people in their car are getting comfortable and it's been there for a while. >> survey monkey ceo dave goldberg, thank you for joining us on "bloomberg west" and breaking it down for us. continuing our artificial intelligence series. ♪

>> you are watching "bloomberg west" were refocused on technology and the future of his nest. i'm emily chang. best buy shares falling 27% today after the chain reported a drop in holiday sales. they fell even though the store offered a very deep discounts. they also said fourth-quarter profit will be lower than last year. attends -- intends to fight tossing out net neutrality rules which includes a possible appeal or rewriting of the rules under a different legal framework.

china has a new richest man. he has just taken over i do's robin lee. li.aidu's robin ma said they may challenege alibaba. now to the special series, "a.i., beyond robots." we talked about watson. you talk to the head of the facebook a.i. department. and now, someone from microsoft. peter joins us from redmond, washington. world, whatnd the kind of things are you focusing on?

>> recovery huge array of things. a big focus right now and the point of the segment is artificial intelligence. focused and itry is the largest investment area the biggest. about aio think answer as they try to questions and figured things out. one is to figure out what that person said. if you see a picture or a video, what is in that video? of is to answer the question why?

ay do they want to see certain person for an appointment? why did this person come to that is reallys? the basic series of this research project. >> in case of the virtual assistant, i was noticing that you had a male figure on the screen. i'm curious from an interface standpoint how you choose with the administrator should look like. >> as we have it set up in the prototype, you can choose what kind of avatar you want. some choose males and some choose females. it is really something that as part of the research we're trying to understand how people relate. what kind of symbiosis or connection can it make together. it's interesting to see what

happens when you change the gender of the avatar. you ever particularly consider hiring scarlett johansson? [laughter] i'm going to give that to you. that's a gift. do with it what you want. [laughter] dog as always wanted my my assistant. his own.h it's all about customization these days. speaking of personalization, you are also working on a smart elevator. would this know what floor you want to go to? how does this work cap g? >> it's a pretty cool project. we set up a bunch of sensors and without any programming, we just system that watched with people did dan did it for

about three months. the ai system started to learn that this is how people behave when they want to enter an elevator and this is the type of person that wants to go to the third floor as opposed to the fourth. it took about 12 weeks of training or so and we switched off the learning and we told to control the elevators. without any programming at all, this intelligent system was able to understand and act on people's behalf. today, they talk about operating a computer. take a computer out of your pocket and start operating. we think you will not be operating computers but instead they will be working on your behalf. this elevator project is just one expression of this idea. on this elevator

issue. the idea that it would learn my habits and no perhaps at some time of the day am going out to get lunch and another i'm going to a different floor to meet someone, how does that break down? >> you can imagine a connected world where centers all around you, sensors and your ambient environment, they start to just understand your physicality, what you are saying, your routines, and even your plans. we see that with the virtual assistant. somehow it's understanding. he's not in the office but we think he will be back in three minutes. if he would just sit still, you would get to meet with him. happen,ng what might those are things that we think it will be built in and deeply embedded in the environment

around us. lunchtime, that it's that you spoke yesterday about having lunch with a colleague on the second floor and it notices that you seem to be now leaving it can behe elevator, smart enough to take you. question that i spoke to when i was over at the lab at nyu. do you ever feel the tech elegy exceeds our own comfort level at this point? there is a level quickly you could implement some of these things but it may freak us all out. >> we have a few laughs in the hallway, some people joke about skynet. the same kinds of intelligence will have to be brought to bear to understand what the boundaries are, what is proper,

improper. to really protect people's privacy if that's a concern. what to really understand types of things may or may not be appropriate to share. , thee elevator project system is incapable of seeing people's faces. it's really just looking at the motions of people in the hallway and not understanding identities. yet, it is still able to learn what people's intentions are. we are seeing these sorts of patterns emerge over and over again. it's incredibly surprising. we are able to look at english words that people type into being, and looking at three letters at a time, we learn "hot" is the same as "warm"

and they relate to "burning." >> really fascinating stuff. it will be interesting to see how this plays out and how it ends up in microsoft products. peter, thank you for joining us here, head of microsoft research. oscar nominations out today and "despicable me 2" got a few. we were very excited today, i've got to tell you. >> we talked to the guys behind it next. [laughter] ♪

>> welcome back to "bloomberg west." i never leach a hitter with sam grobart. a big day, oscar nominations. jon erlichman has been watching at all. on a surprises you go -- any surprises? >> always. take the best actor category. there are nine potential winners

there. theyone has a great spin story. sony with a few nods, "american en one. paramount has a couple. then you have fonts that have some great success at the golden globes with "12 years a slave." speaking of the golden globes, we were talking about netflix success there. all of a sudden netflix made its way into the oscar conversation. old media, new media, everyone is happy and los angeles. >> netflix is celebrating. someone else celebrating is the 2" behind "despicable me nominated for best animated film and best original song. we are joined by the founder and ceo of illumination entertainment.

sam's kids have been watching your movie on repeat. >> this runs on a continuous loop in my house. we have been to the theater many times. congratulations. i wanted to ask you first that there seemed to be for a while a bit of a duopoly as far as feature-length films. you had pixar, dreamworks. how does it feel to be part of the upper echelon at the top of mount olympus? .> it feels fantastic especially today, a day that, needless to say, fills me with e for the entire team. bes great company to joining. >> one of the interesting thing about the work that you do as there is a connection back to france, if i'm not mistaken. can you tell us a little bit

about that elation chippy? -- about that relationship? >> our films are made between los angeles and paris. the competition was so fierce that i could not doubt her a level of world-class artists to attract them to my company so i had to go out and look elsewhere. france has this magnificent history of animation and we ended up making the first film in france and every one since then in france. we now have acquired the small company we were working with a which is now a illumination m cguff. we raise 6000 miles between l.a. and paris. erlichman.jon

we know behind the scenes this is an absolutely tough business. to look at what happened with reports worthy, but it was easily under $100 million and has generated more million global, explain it to us the recipe. how do you make a profitable movie? >> i had been at 20th century fox prior to forming illumination with nbc universal. there really good success with the "ice age" films and a number of others as well. the premise when i started this for ay was to make films reasonable budget that would allow us to exercise more creative freedom. with a crowded marketplace, my

premise was that we would have to embrace risk in order to break through the clutter of the other 10 movies that would be released, which is approximately how many animated elms released every year. the idea that it contained economic model would allow for greater freedom was a thesis and it turned out it was true. for example, "despicable me" is animated film.l our protagonist is a nasty villain. to even make a film called "despicable me come: animated film for a family audience -- an animatedme," film for a family audience is a strange choice. andriters, my directors, over 400 artists and production

personnel, the thesis was proven true. >> you mention other movies. what other movies out there are your favorites? who is doing good work? there's a lot of good time when done at a people frequently complain about whether or not hollywood is taking enough chances. i look at the range of films this year and i see a lot of films where there is just extraordinary work. it's a strong crop of films in our own category, by the way, to be side-by-side with this nomination is a great honor for anyone who has ever thought about eating involved in cherish. for them to i look across the live-action see great work in

films ranging from "american street,""wolf of wall "12 years a slave." filmmakingraordinary and we need risky, extraordinary filmmaking to push the boundaries of safety in order to compete with all of the other platforms and forms of media that are also trying to attract the same eyeballs that we are. i'm gratified to see so many ill makers, so many studios and others pushing -- so many filmmakers pushing themselves to make exciting films. andri,is meled congratulations and thanks for joining us today on "bloomberg west." coming up, i'm excited about this story. and her late tech club with some of the most famous founders

including those from apple. >> that's coming up. ♪

>> welcome back to "bloomberg west." i'm emily chang here with sam grobart. it's time now for the byte. jon erlichman has it for us today. >> this is a really cool one. 38. 38 years ago, a club got started in silicon valley, the home brew club to help apple getting forward with its incredible career. here's the story. before the iphone, the imac, or even the windows pc, members of the home brew computer club on the steve jobs among them, gathered every other week first and a garage and then on the campus at stanford. like the home brew computer club was social media in its day. we were witnesses to a lot. not all of it have the same impact and duration of apple.

into thennot get far history without running into the meteorite rise of apple. and 38 years after the club started, steve wozniak is getting the rockstar treatment at its first reunion in years. >> everyone in the club talked to me and had ideas, that what inspired me. what should really be useful for people? i wanted to be a part of this so bad. >> he owned a computer store called the byte shop. after watching apple one, he invited jobs to the store the next day. >> i told him that if he would assemble and test the apple one computer that i would buy 50 of them. >> the price -- $500 apiece. it was their first deal landing in 1976.000 cliff that was basically the seed capital to get the company off the ground.

it,ften getting credit for wozniak has high praise for the entire club. >> i was just a geek very steeled -- skilled. these were the intellectuals i admired. >> this club had a huge impact in technology. how big was the turnout at the reunion that just happened? >> about 150 people. it was a big crowd. people like talking to woz. they had a good time for sure. >> what was the sort of dynamic there? is woz an idle? -- an idol? were there other big names there? was it all about steve? >> they all speak the same language. maybe it's a little different but you go back to the early days and what they would talk

about in the club, they would be the same world of thinkers. bill gates would come up at these meetings the same way that he would come up in the boardroom conversations of technology companies but not before anyone knew who he was. he was just doing some cool up in seattle. this was the place where they were going to talk about the future movers and shakers. interesting stuff going on. doesn't this illustrate the differences, going from a community of hobbyists to multimillionaires. you can see the difference. >> plus everyone talking about it on twitter and social media. >> that was a room full of men. >> how about some ladies? we need more girls learning how to code. inc. you offer watching this edition of "bloomberg west." we will see you back here tomorrow. ♪

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>> this is "lunch money." we tie together the best stories and video in business news. here is what we have. in company, sale at best buy. shares plunge on a rough holiday season. in career, the man behind do good toms shoes. in nation, the magic touch. obamacare adds to its dream team of pitchmen. our casino segment. a.i. -- artificial intelligence coming to facebook. what everyone is talking about,