>> 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. microsoft's new ceo addresses customers and partners for the very first time. a 22 year microsoft veteran took over the top job today. he last ran microsoft

enterprise and cloud business. take a listen to his first public message. >> software is still a very valuable, malleable research to create it as experiences and i think that is where we will be focused on. think about how everything we do will be digitally mediated. that means that experiences such as online meetings or how i connect and communicate with my friends and family or how i view entertainment will all be changed by software. those are the places where microsoft is squarely focused in bringing our innovation. >> in addition to nadella taking the top job, bill gates has stepped down. gates will remain very involved as a technology advisor. we have a roundtable to discuss now. michael pim joins us via skype from seattle.

joining us from l.a. and our editor at large, cory johnson joining me. what do you think about what you heard from satya nadella and that address? >> i think he is right. i think in a number of these markets. in a number of cases, i think microsoft is its own worst enemy in trying to overcome internal struggles and how it regards innovation and how it can move forward quickly in these markets in a way that can sustain organic growth and innovation and as well revolutionize the culture within the company. >> we have not gone to interview satya nadella just yet. we are getting to know him.

they said no to interviews today. but cory, what did you think of what you heard from him? is this a guy who can inspire the troops? >> i think he has a clear vision of what microsoft will be. i get the sense that bringing bill gates in, you know that bill could not do it without you, come on in. that he is savvy enough to thought about how he will do the job that he is going to do. reaching out to the people who will advise him, that kind of thing. the board level has really embraced him in this dig. -- gig. he may even know who he wants to promote and get rid of right now. >> you think this marks a clear divide in the gates versus ballmer way of thinking. tell us what you mean by that. >> i think of this as a resurgence of gates' vision, which he has called for several

years integrated innovation, versus steve ballmer's which for decades he has called derivative branded innovation. innovating the major brands within microsoft, windows, office, xbox, etc.. while the innovation market works very well, it doesn't as well in the faster moving consumer side. i think we could see perhaps a spinoff of some of those assets, such as xbox or msn, or being -- or bing. a lot remains to be seen in how they will extend the integration model with being able to move quickly in some of these consumer markets. >> indeed. i want to bring you into this. you helped break the news. i wonder, do you have any notion

of why the board likeed this guy among all the good candidates they had to choose from? >> i think for a lot of the reasons you guys highlighted already. i would add to that his willingness to understand and work within the world that is microsoft, but also to test some of the theory and to battle back in some cases, show some of that fight. i think what he was just saying is fascinating and that will continue to be explored. i do not know that the takeaway today was that microsoft is getting ready to shed any of the significant assets that it has and if you were to do that, obviously, that would result in a game-changer. even if there is a bit of a difference in terms of his thinking, i think there are still in getting to your question about why get the job. i think there are areas that are very much aligned with steve ballmer and the plans he put forward when he goes over words like mobile first, cloud first,

and reshipping this company around to a changed world do how microsoft software is used. >> i want to bring in the former senior vice president at microsoft and also satya nadella's former boss joins us now. doug, tell us a little more about nadella and how he developed over the years that you have known him and how far he has come as a leader. >> first, i want to say it was a great choice by microsoft to pick satya nadella as a leader. i met him when he was 33, a young executive. he showed all the promise you are seeing now and he is an exceptional human being. he has a strong moral compass, a great family. he is a brilliant technologist. he is strong in the business field. he has great emotional capacity for listening, compassion, and empathy with team members and

customers, but he is also willing to make the tough decisions. i think is the complete package and i am excited that microsoft made this choice. >> the acquisition is thought of as one of the best, cleanest that microsoft has ever done. with satya nadella on the other side of that transaction, tell us how he approaches m&a, and integration of another company. doug, that is for you. if you can hear me. >> we may have lost his connection or he is just ignoring you. >> that happens a lot. >> microsoft has bought a lot, including nokia which people thought was a big mistake. skype. how is satya nadella going to approach acquisition?

>> i think what doug is alluding to is he is a great architect in getting things to work together in a very multi-disciplinary way. i think of him as the chef who can figure out how to make a right dinner with everything that is in your fridge. but he is not necessarily the guy who is going to come up with molecular astronomy. he can identify opportunities to get waring factions to work together. i think that is a great skill to have with the new ceo. >> we got you back, doug. i want to ask you. what is his approach to m&a and integration? >> i think he has a lot of experience on the side. everything he did in the world when he was leading bing as part of microsoft business solutions, he has seen and understood what a good acquisition looks like and what a bad one can look like.

the importance in the software acquisition of retaining talent. he gets that to the core. that is one of the tools he will have in the playbook going forward. >> as a leader, what do you think the biggest challenge is going to be? >> i think he came right out of the box today. he said what he thought was the most important thing. he feels the company needs to be more responsive and accelerate its ability to innovate. it has to keep delivering in a forward-looking way. the company has some of the greatest traditions in the world but people do not buy tradition. they buy innovation. he is setting the tone with an -- a call to everyone in the company to tap into that passion. the passion that you have to your work can make a difference in people's lives. microsoft has had an impact on the global economy as any company that has ever been invented. it is a tremendous -- i know he is humbled by the opportunity to lead, but i think he understands that connection to passion.

>> all right. former vice president at microsoft. jon erlichman and cory johnson, thank you all. as we head to break, be sure to turn into tomorrow when disney's ceo will be joining us live from disney studios. we will talk about the company's earnings. we will have more on microsoft's next. ♪

>> welcome back to "bloomberg west." we are discussing the big news of the day. microsoft officially naming its new ceo, satya nadella, to replace steve ballmer. they've released a series of videos. take a listen to what don thompson had to say. >> after reviewing all of the candidates, satya nadella was our first and unanimous choice. he has the technical expertise, the product experience, and the

leadership attributes we were looking for. >> former ceo steve ballmer also had something to say. take a listen. >> i am so excited today to be part of announcing satya nadella as our new ceo. he is a microsoft veteran, 22 years he and i have had a chance to work together. i know satya nadella will lead this company into the future and that future is going to be right with innovation, with growth, and with impact in the market and on the world. i love this company and today could not be a better day. >> we will all certainly miss steve ballmer's enthusiasm. we are here at a roundtable of special guests. microsoft's former president of

the office division, he joined them in 1992, he led healthcare.gov, and cory johnson our editor at large here as well. one thing i do want to mention, there is no indication that steve ballmer is stepping off the board. he is still a director. gates is a director as well. he is taking a greater role in product and product development. how is this going to affect nadella's ability to do what he needs to do. >> i think it will be a positive thing. i think he gets a lots of different voices which are complementary and challenge one another. if you think about its, steve being the strong business person and having more of bill's time to engage in the technology side, it'll be a strong cast of characters to drive the strategy. i think satya nadella will be that person who will balance out the different priorities. i think he will do that.

he has a strong relationship with both of those leaders and he will be able to do that balancing act in a strong way. >> what kind of power does bill gates have over employees? when he is in the room, is it almost god-like? >> he is certainly revered within microsoft. there are few visionaries on the planet that have made such a contribution both to the for-profit and the non-profit space as well. i think people look to him for what is that shining light, the direction that we need to go. they look for that spark of genius that we see and that he is driving into our products. they look to him for confidence and leadership. >> let me ask you about what microsoft needs in a product portfolio standpoint. whether it is xbox, where do you see a need for something better?

>> can i just say that i think it is impossible -- go backwards for one second. there is no way this relationship with ballmer and gates works. i have to assume this is just happy talk dealing with sucession issues. i do not see how a strong ceo will operate with a former founder sitting there designing products in the back lab and saying, what do you think of this? leaving that aside, i think priority number one will be to consolidate power. that will have to be where it starts. moving from there, the priority needs to be in enterprise and cloud services. to demonstrate that to the marketplace, nadella has a great rep with the venture community. i've said before and cloud services, there are people sitting out there that microsoft could easily acquire and would say that they are serious about what they are doing and get a

lot of the value investor guys off of their back. they could say, no, we are going to do this. that is what i think they need to do out of the gate. >> microsoft office has been and remains one of the most important divisions. that is a division that you ran. what you make of some of these ideas that microsoft should get rid of xbox, being, tablets, and focus on the enterprise? what do you think that nadella should do? >> i think we have a strong set of businesses across the board. i did want to comment on how would it work with bill and satya nadella. nobody gets to a position like president of the ops division or cloud an enterprise without being able to tell bill, thank you very much for the input, i have heard it, and yet we are going to go in a different direction. i think it is a mistake to think

about this as he'll being the sole leader on the technology agenda. it is about providing satya nadella input into the process. we do understand how to take that input with a lot of other input. >> why have him, then? why have a strong founder there? he has been out of the technology industry by his own omission doing much more useful things for the planet for years now. why try to reinsert him when the company is going through this succession, i think it confuses things. >> i think there is a great opportunity for him to contribute. if he is going to spend up to one third of his time weighing in on the technology issues that space the company, i think it is an incredible asset. i think his track record says that has a great potential for the company. >> go ahead.

>> i think you can lay an awful lot of the blame for microsoft's relative stasis compared to its competitors for the position at gates left it when he left. it is difficult to make a strong argument that someone who has been out of the business in every meaningful way for some time now and already left the company in a position where it had to struggle to figure out its identity is now the right person to play technology visionary alongside a ceo. i think that makes a problem. >> real quick, we are out of time, do you hear anything about additional shakeups as well now that's one person has been chosen and it means others want to be? are you hearing about any other additional shakeups? >> there is a lot to talk about whether people will choose to leave. because of everything you guys just said, let's see what happens over the next eight months, not just with people inside deciding this is not the place for them to be anymore, but even with, say, steve ballmer and what his role will be.

when it comes to the meeting and they decide, we have a more interesting story to discuss at that point. >> jon erlichman, our ceo west coast correspondent. we will see you after this quick break. we'll be talking elizabeth more about samsung preparing to watch -- launch the galaxy s5. ♪

>> welcome back to "bloomberg west." i am emily chang. samsung may be rolling out its next flagship smart phone this month. february 24, it is called unpacked 5, hinting to the

successor of the galaxy s4. what could the next galaxy look like? a contributing editor is back with us from san diego. what else can samsung do with the galaxy? >> what do they have left to do? they could have carpet bombed the landscape with size, colors, battery size. i think this will be a step back in some ways which will be welcomed. there'll go back to little more google integration. they are on more speaking terms. more integration of google now. less samsung customization and more of the vanilla android experience. i think it'll make it a credible nexus competitor. that is my guess. >> samsung and google signed a big patent deal. google sold off its motorola unit to lenovo. given that context, how much danger is there to the

possibility of samsung stepping back from android and relying on their own operating system? >> i think now that they'd do not have google as a head to head competitor, they do not feel any pressure to produce a more vanilla android experience. these truly bizarre customizations that have alienated and confused customers. what you will see is more partnering and more of a pure android experience. in the latest conversation, the real push there is a recognized the problem is not hardware. it is software. they are hiring aggressively. if i did not see that i would be disappointed. if it is more hardware, i would say samsung still doesn't get it. >> our bloomberg contributor and editor from san diego. thank you so much. we will be covering that samsung event from barcelona. we will be back after this quick break. ♪

>> you are watching "bloomberg west." we focus on technology and the future of business. google and cisco have entered into a long-term patent licensing deal. but two tech giants will cut down on future patent lawsuits. both google and cisco belong to a patent advocacy group. panasonic has reported a double-digit rise in profits for the third straight quarter. profits were up 20% in the third quarter. panasonic has been shifting away from tv production and pivoting to a range of products including

auto parts, solar panels, and home appliances. netflix has announced a $400 million bond sale to raise money for capital expenditures and expansion. netflix plans expansion in europe and the more -- the creation of more original shows. president obama spoke this morning at a middle school in maryland about an initiative launched last year to connect 99% of students to high-speed internet within five years. take a listen. >> under the leadership, the fcc is announcing a down payment to connect more than 15,000 schools and 20 million students to high-speed broadband over the next two years. >> microsoft, apple, at&t, and sprint have pledged over $750 million collectively to help

connect schools. our editor at large, cory johnson, back with me. >> this is a big deal. this is not just about getting dial-up or anything else at school. it's the thing that has been criticized in the past for leaving half the budget unused. now they doubling the grant size. we're joined now from our d.c. bureau to talk about this. on some level, this is a decision by the fcc, as i read it, to decide not to put cellular phones in the hands of poor people but to expand high-speed internet into schools. is that the trade-off here? >> i do not think that is the trade-off. it is an effort to recommit and reboot the program which we have had in place for many years now and make sure it focuses on bringing high-speed broadband to all of our schools. not just connecting them to the

internet, but bringing high-speed broadband to schools everywhere. >> does this end up being something that is not just for the kids but ends up being for the surrounding community just by virtue of high-speed and so on? >> absolutely. that is a great point because when we bring high-speed broadband to schools in every community, we make it incrementally less expensive to deploy to businesses and homes nearby. it is an infrastructure investment in the country as well. >> is this -- president clinton first initiated this notion of getting the schools connected to rid we have over 99% of the schools connected in some way. is high-speed that different for school kids for school? >> yeah. i think high-speed is a game changer. it changes the way we create and distribute content. it changes the way we consume content. it is not just changing our commercial lives, it will change education, too.

>> why wasn't all the money put to use in prior years? >> we have had a complicated and bureaucratic system. i think one of the good things we're doing now is taking a hard look at that system and finding ways we can be more efficient and direct more dollars toward broadband services and not old-fashioned services. >> was that the decision before? there was a lot of money to spend an being spent in stupid ways, so why spend it at all? >> i think the program had been chugging along. it was a byproduct of the telecommunications act of 1996. 1996 was a long time ago. it is time for a top to bottom revamp. it is time to refocus on broadband and capacity, not just connections to school. >> everyone with a phone bill is paying for this on some level but it is principally being

funded by long-distance and international voice calls. fundamentally, the revenue for those things, are declining. so you talk about a fundamental overhaul but you are not fundamentally changing the input which is the money, that is probably declining. what needs to be done to address that? >> we will have to take a look at those things over the long haul. in the near-term we are making a concerted effort to be much more efficient with the dollars we do have and i think that is a good thing. >> we have seen lots of initiative not just in silicon valley. we have seen lots of companies wanting to sell into the schools. what about educational outcome? i've never seen a single study proved that more technology helps children learn, particularly when there is no money to teach trainers how to use high-speed internet for their classrooms. >> you make an important point. you cannot just bring the technology and the broadband. you need to find ways to invest in teacher training. we will have to look at new ways we can do that here in

washington and work with some of those companies that announced commitments today to make sure they can help as well. >> educate me. are there -- is there anything in the additional spending that will do just that? teach the teachers how to teach? >> yes. there are some commitments that have been made today and conversations about how to update the educational and secondary education act and take a hard look at what we can do for teacher training for the digital age. >> in 2002 and 2004, there were discoveries of fraud and abuse going back quite a way. there were some serious issues. people were put in jail. allegations of hundreds of millions of dollars wasted in fraud and abuse. what has changed? what do you do to try to keep that from happening? >> if there is waste, fraud, and abuse, we are going to find it. we will make sure anyone who

participates will be penalized and cannot be a part of the program going forward. it is essential that we make sure this program is well-run because it has the ability to do such good. >> thank you very much. we appreciate it. >> does the tech industry need more diversity? we will talk about the skills gap and opportunity gap and what needs to be done to fix them. ♪

>> welcome back to "bloomberg west." i am emily chang. who is taking the ap computer science exams? not a lot of girls, blacks, or latinos. in three states, no female students took the exam. in 11 states, no black students and in eight states, no latino

students. how is it impacting a skill gap in silicon valley? we have the managing director at the center for social impact. this is coming out of a study at georgia tech university. 2200 schools -- only 2200 high schools offer this course. there are 22,000 public high schools in the country. who is to blame here? >> you originally framed the question of how early does this gap start? the answer is early. a study was done a few years back and asked second graders to draw a scientist and the majority drew a white man. we are talking about the early self perception. the other thing is there is a huge shortage of teachers who

are trained to teach computer science adequately. we are losing way before these kids ever hit high school and that is something we work on. >> one of the things that shocked me is i always assume the numbers are getting better but slowly. in wyoming, it has gotten far worse. 35 students took the exam in 2001 and last year no one did. why is that? >> this is something we are seeing across the board that the numbers are getting worse. part of it is an imagery of diversity in this field. students, whether it is young students looking to experiment with what they want to do when they corrupt or college students thinking about what field they want to enter when they graduate, they are not saying people who look like them succeeding in the field.

which is not to say there are not successful latinos or women in the field, there are not enough that they are visible role models for the students. >> it is always been a requirement. should computer science be a requirement? 50% of kids who took the ap calculus test were girls. and the numbers are like 18% for computer science. i took calculus in high school and i would have never even thought about computer science. >> we absolutely believe that it is. given the need to train a 21st-century workforce alone, we have to make computer science as ubiquitous as math. we all know that if we want to get into certain level of colleges we have to end up in calculus or close to it. we do not have that same imperative around computer science. >> how much do kids know about computer science when they graduate from high school? should they know how to build a

website? should they know more than that? >> anything you can learn before graduating from high school can give you a leg up. it is important to recognize it is not too late to start looking at computer science when they are in college or after they graduated. we have a program that works with college students around the country. some of our students have been programming since they were children. others picked it up in college and are excelling. it is not too late to start if you are a bit later in your education trajectory. >> i have a number of nieces and nephews i buy christmas gifts for and wanted to make sure to not get the girls girl stuff and the boys boy stuff. there are games out there that help kids learn how to think like programmers and then we got into this debate with their parents about if they have not expressed an interest in it should they still learn these kinds of things? if they have not expressed an interest? >> most kids express an interest on the consumer side. >> i didn't like going to pe

i hated running a mile but i had to. >> this is a huge pastime for kids from all backgrounds. people of color are huge consumers of tech. we haven't done a good job of explaining that someone is on the other side of that screen determining what you are consuming the it's a videogame, movie, whatever it is. we have not allowed children to see themselves as the creators of tech. they may love minecraft but never think that they want to take a computer science course. they may love legos but that is the kind of thinking that is required when you are building a platform on the backend of a system. >> what do you think is the problem, the opportunity gap or the skills gap where we do not have enough skilled people to fill skilled jobs? >> they are flip sides of a coin, really. we're looking at a changing demography in the country. the country will be a majority

minority in the year 2040. that means there will be a new workforce. the skills gap, companies when they are looking and needing to hire people are going to have to look to a labor force that looks different than it does now. really, it is impossible to tease them apart but they have to think about solutions holistically. >> all right. thank you so much for this conversation. it is certainly not over. i am happy you were a part of it today. as we head to break, this caught our eye today. google's homepage is famous for its doodles. and now they are sponsoring a doodle contest and asking them to draw a doodle about making the world a better place. the winner will see their artwork on google's homepage and a $30,000 college scholarship and a $50,000 google tech grant for their school. entries are due by march 20. up next, facebook turns 10 years old today.

we look back at the first decade and consider the next. ♪

>> this is "bloomberg west." i am emily chang. target cfo testified on capitol hill about how to prevent data breaches. washington correspondent, megan hughes, has been covering this story. what did we learn today that is new about the target breach? >> mulligan walked us through the timeline here, what happened. he said the department of justice notified the company. the company investigated and found malware on point-of-sale registers that was capturing card data from that magnetic strip on the cards. target now says they are accelerating their timeline for

these chip-enabled cards. mulligan said if those had been in place, this breach would not have happened. take a listen. >> there are a number of participants in the payment card world. we need to work collectively to move the chip and pin technology. that would render the information taken far less useful. we are committed to moving forward and accelerating our efforts in that particular area. >> we also heard from the neiman marcus cio. they said they are on board with chip technology but one difference between the companies is pin numbers. target wants pin numbers in addition to this card-enabled technology as an additional layer of protection. neiman marcus is more reserved saying they are waiting until that becomes an industry standard. >> it certainly all makes sense

but it will be expensive and take a long time. megan hughes in washington, thank you. today is facebook's 10th birthday. the company that mark zuckerberg started in his dorm room has grown to more than 6000 employees worldwide, averaging 750 million users every single day. here's a look at some of facebook's most memorable moments in the last decade. ♪ >> the facebook was started in 2004 as a harvard-only social network. by the year's end, it had one million active users. it's meteoric success wanted the founders to drop out of harvard and head west to silicon valley. there the facebook became just facebook. in 2005, facebook grew to support college networks and ended the year with 6 million active users.

by 2006, facebook opened the doors to anyone with a valid e-mail address and launched a newsfeed, luring users back on a regular basis. users shot up to 50 million. in 2008, the facebook iphone app debuted and users tripled to 145 million. 2009 was a good year to like the like button was introduced. mark zuckerberg or a tie for the year and callous were addictive. facebook supersized in 2010. users increased to 608 million. in 2011, facebook introduced timeline and the company was valued at $50 billion. 2012 saw users top one billion.

facebook bought instagram and the company went public at your kids dollars a share. by the end of 2013, facebook servers saved more than -- a cut. to put that into perspective, everyone million gigabytes stores about 10 million photos. at that is a lot of selfies. this year, facebook celebrates 10 years and continues to grow. zuckerberg's next challenge, making through next year. >> it is time for the bwest byte where we focus on one number that tells a whole lot. tell me it is not 10. >> it is not 10. it is 31.5%. facebook is said to have 945 million monthly active users of mobile in the last quarter. that is 31.5% of the world's 3 billion internet users. it is amazing they have gotten those numbers. it is also amazing how much runway is out there for them to perhaps gather more.

>> a lot bites there about facebook today. another study talking about how only 10% of people actually change or update their status every day and yet the one thing that pisses off people most is over sharers. it seems at the conclusion of the study is that the over sharers tend to dominate facebook. i wonder what that means for facebook in the next 10 years. >> there are always people who like to talk a lot and about what they are doing. those people are on facebook and looking at that stuff and is saying, i am relying on you to talk a lot so i can actually get my interesting information. i do not think it is a big deal. everybody is different. the point is that everybody is on facebook. that has been a good thing for them and everyone will use it in a different way. >> i do not know. if more than 10% of people updated their status daily i might not want to use it.

>> as he pointed out which was big. facebook is so depressing for me this week. the passing of my friend. all these people from my hometown. it's the last thing i want to be. we talked about this during the election when it felt like a small village because of the political opinions being expressed. i think it is interesting to watch facebook deal with these changes and the way people use it in changing times and make their business relevant to people. >> it is interesting thinking about the next 10 years. someone said to me, they don't think anything will ever be bigger than facebook. there are now so many options out there. do you think that is a potentially fair assessment? >> snapchat will do what they can but they have a long road ahead. >> there are so many other options including snap chat, twitter. happy birthday facebook. thank you all for watching this edition of the show. ♪

>> the following is a paid program. the opinions and views expressed do not reflect those of bloomberg l.p., its affiliates or its emplooror >> the following is a paid isement for omega xl. ♪ >> my name larry king. a few years ago, i had to haagat open-heart surgeopenand when iop recovered, i established the the larry king cardiac foundation to help people like me avoid heart problems with propoblemsds, dication, and have ation, hy