live from pier 3 in san francisco, welcome to the early 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. fixed a major security flaw in math computers. or is a note about that allows hacker to track every slight. it gives hackers access to a variety of data. ands more than just spacex

virgin galactic in the private space race. satellitear about new being watched -- launched into space. it is the three of the congress in barcelona. it is a crucial time for the world cost biggest computer services company. ibm headcount dropped for the first time in a decade. keynote, she spoke about three trends that are brees shaping the tech industry. david kirkpatrick asked what industries are adopting best to these trends? >> these three chefs, they are not three isolated shifts. data, cloud, engagement, they are all one. industry, but not every

industry. modeltion to the business is one of the most significant competitive advancements. it depends what side of the fence you are on. --view is that it is particularly because i think data functions on a certain platform, you see some of the most aggressive industry here. you see with the carriers, telco, wireless riders. you see it with banking. how many clients are starting to put in place chief data officer's who report to the ceo. i see it in financial services and i see an telco. the thing about monetizing your information, they are taking your personal information and finding a way to sell it. it is finding a way to do business president.

you worried that business leaders do not get the scope of the changes? it occurs to me that a polar companies are not getting with this program. there are startups popping up all over the place. realat point of speed is a point. it is absolutely -- if you try to compare today to the past, today is mark -- moving at a much faster speed of pace. you should not be dissuaded by that. that is all the more reason to push forward with these things. . think of a conversation i had i was at the dinner table with a number of ceos. it was about how you differentiate and the speed at which you do about it. you run a business today and you run a business for the future. talking to ceos and

they are getting it more than they used to? in the past, you might have talk to the tech people. >> i think everybody in this audience will experience the same thing. we are bringing technology to the forefront of every industry. we were briefly talking about education. it makes me think of this. one of the most important things for any country or company is the path of education needed for the future. we are thinking about a culture of data analytics. it is not just for mathematicians. it is going to be a threat to every profession and every degree you get. we are going to hire that way. people want to hire data sciences. this has to be systemic. we are working at 1000 universities on a program with data and analytics.

as you were so nice to point out so many years ago, we have that going for us. this whole point was about, you have to get that silver thread through everything you do. you cannot count just on engineers. >> it looks like you are trying to make ibm a role model. you are making big changes in the company. you sold a number of major businesses. you announced acquiring another group. you also brought another company. you have 40 data centers around the world. that is a big number. you have a billion dollar investment. you are making very rapid changes. >> they are illustrative of the speed at which we are moving. >> using ibm has to show its customers just how much -- you

are one of the biggest companies in the world. choice, butnot a the interpretation i would have take away from you, in effect, you are showing what other customers need to do. >> this to me, and i know many people in this audience work for a company that may have a history, it was not born yesterday. any company has to go through transition. we are 102 years old. we started out doing time clocks and heat sensors. that is not what we do today. you go through these transitions. to these new areas. that applies to everybody. mention the mobile industry. do you think it is changing as quickly as it could be changing? that bringing to the fore with that recent

acquisition by facebook? theoretically, that could've been developed by a carrier, but it wasn't. beple are going to have to sentimental, more than they have. how do you feel about how the mobile industry has been doing? >> there are a lot of great examples. this is not a new thing for this industry. there has been a lot of change in this industry for quite a keyword -- period of time. i think a better way to think of it -- is evidenced by how many people are at this conference. i think it is moving along very fast. i also think that there's a bit of -- there will be many benefits that people have. -- 10,t new bundles and

combinable models. >> the ceo of ibm with our bloomberg contributing editor. we will speak with david kirkpatrick about that interview next on bloomberg west. ♪

>> welcome back to bloomberg west. i'm emily chang. we just heard from the ibm ceo. i want to dig deeper into their business strategy and what she had to say. conducted thatck interview. york ising for a new also here. what was your big take away from speaking with her? we rarely hear her speak publicly so it is fascinating to hear what she has to say about the transitions happening within ibm.

is interesting that she chose to make one of her first big talks at the conference in barcelona. it underscores how mobile has become a central to all technology. ibm is recognizing that that is a shift. she also announced that there was a watson mobile challenge today. the signature technology that they are so proud of, they are applying it to mobile. asking people to submit ideas and they will give prizes to the winning at. i think she has the right vision of the right changes, data, clout. she calls an engagement, and others might call it social. these changes do not happen simultaneously. ibm realizes that she has a giant aircraft carrier that she has to shift. she is not all the way there, but she is doing them or things. -- important things.

>> ibm is cutting jobs. the revenue has dropped. to what extent the she inherited these problems? >> she is nearing 1.5 years in her role leading the company. you could argue that some of these issues were inherited. shipas tried to right this and get rid of some of those money-losing hardware businesses. she is trying to bring ibm through that transition that she talked about. >> you would say that she inherited them of these challenges. >> some of them, they did, long when she took over. the shift in technology has really -- it began before she came in. she had to bring her company into this new clout era in terms of keeping up with the tech space.

>> david, what is your sense on what ibm is now and what ibm is becoming? -a lot of the revenues that are very low margin are from the hardware business. the company could possibly shrink and become more profitable. revenues have gone down, but rabbits have not. earning per share is quite good. i do not have any billion-dollar industry standard service businesses they sold lenovo, but they are shrinking by choice in some respects. the keys to figure out how to grow in more profitable areas of our. it is becoming a software and services company. 10-50% of their services are hardware, and that is a lower number than it was recently. terms of jobs, they

recently committed to keeping 3100 jobs in new york a through 2016. one analyst says that they could cut 13,000 jobs this year. is that what you are hearing? shift company has had to and they need to become smaller and more focused. when they sold the computer business to lenovo, now they are offering the server business. they have to shift their focus to clout and social and mobile areas, away from the legacy hardware business. that might mean cutting some jobs. we have heard from employee groups that they are already earning to cut overseas in europe and asia. job cuts are supposed to start coming in in the u.s. as early as this he. drive -- jive with ibm moving into this new era.

>> some of the things we've heard about watson, it sounds really great. it sounds like it could revolutionize industries. but some clients of said that it is too difficult to teach watson everything it needs to know. it takes too long. what about those kinds of concerns? -- whenare up against you think about it, they are going up against google and amazon. these are much more modern companies that have an intrinsic web dna. they know how to operate superhigh volume analytical systems. it, but i have a feeling it is one of those technologies that is going to take a long time to prove it out. it would not surprise me that turned out to be good. they're pretty proud of this thing they keep talking about. they are trying to diagnose various cases. that took them a long time.

none of the cool thing about it. the more information you put into it, the better it gets. it is a lot like google in that sense. ibm towell-equipped is compete with google and amazon? -depends on the space. we see them opening up their cloud platform and opening up watson to developers to build the ecosystem with outside help. investors and analysts will tell you that amazon got in ahead in the cloud space. ibm might be trying to keep up. they're making a big effort. it is a bit of a race here. pushing to get that company there. we will see if they can really expand as much as amazon has.

bloomberg contributing editor david kirkpatrick in barcelona, thank you for joining us. old versus new in the private space race. why a 30-year-old baseline year is coming back to take on elon musk. you can watch a streaming on your phone, tablet, and bloomberg.com. ♪

>> welcome back, i'm emily chang. the private space race is heating up. yearmusk versus a 20 veteran. launched a successful flight to the international a station. david thompson, the ceo is joining us from washington, d the. d.c.shington, rex ryan only. originals the commercial space company. we were started in the 1980's and we have been a pioneer in developing commercial rocket and privately owned satellites and a variety of other technologies

over the last 30 years. >> where did they see an opportunity here? how much business is there in the private space race? why would they want to get into this business? >> you would be surprised. in the 30 years we have been in business, commercial satellites and rockets have gone from being torly small to having led countsbusinesses that over $100 billion in revenue last year. that includes satellite services and manufacturing of satellites and rockets and so on. >> you guys are the fifth-largest government , 93rd overall, how

does that compare to a sex? >> we have been working at a good bit longer. we are larger than most of the new generation of space companies. industry, even though our products are focused on small and medium satellites and rockets and are developed more rapidly, it still takes a while to conceive and design and produce and deliver the kind of systems that are used in spaceflight. >> you had seven successful launches. you are starting your be these year yet. what are you going to be doing? what is the bulk of the business? >> lester was a very busy year for us. we developed and delivered an launched about 50 different types of rockets and satellites.

this year we are looking for almost 60 operational events to take place. use satellites in global communications, imaging systems, and others are operated in conjunction with nasa. others are used in scientific and military applications both for customers in the united states and overseas. >> he just signed a new agreement, tell me about that. tell me about the future of the space race and commercial space travel. why is this important? >> we are pleased to team up with some new companies like skybox imaging to provide technological infrastructure that they need for their business. there are a variety of waves of new enterprises that have

developed over the past several decades. skybox is one of the leaders. they are developing new lower-cost imaging satellite that will make products toilable in almost real-time lots of different customers around the world. of the is next in terms commercial space race? >> one of the really exciting areas for the next couple of years will be partnerships between government agencies and private companies. this is a relatively new way of doing business. in aam. with nasa partnership to develop the equivalent of a federal express sort of delivery service. essential items can go from ground into space for astronauts.

we will see more things like that develop ready discipline and the efficiency of the private sector can help the government. admissions. will have to leave it there. very interesting stuff. we will have to be right back. ♪

>> welcome back to bloomberg west. we have breaking news out of the ebay. about carl icahn. olivia sterns is that the breaking news desk in new york. is firing back against carl icahn's claims and saying that they are false. he has written his second letter in three days telling ebay that -- ebay is saying that carl had accused him of having conflicts of interest.

cook, is the ceo of intuit. theircahn had called governance dysfunctional. he had singled out both mark andreessen and cook. is that their claim for false. shares rose in ebay when icon went public with one of his letters. there is a back and forth between carl icahn and ebay. >> olivia sterns in new york, thank you so much. i can't claim is against scott cook, the cofounder and chairman. they claimed he claims against them are false. we will follow that story as it develops. i want to get your bloomberg cap headlines. u.s. prosecutors are investigating criminal activity by mt. gox.

they are requesting documents from bitcoin service providers. they say there may have been criminal activity at the range. gox was shut down after hackers stole most $400 million in bitcoin. west virginia is banning drivers wrong wearing google glass. they are concerned about the potential for distraction. google has hired lobbyists to educate lawmakers about the device. barnes & noble reported that revenue fell. sales were down more than 50%. aftero is cutting ending lowering prices for the note -- nook. they announced plans to offer a color model earlier this there. now to security flaws at some top 10 companies. it seems to be all too common.

apple issued an update for its software for mac computers. security risk first spotted last week. it comes as another ios flaw has been discovered in. past thatsaid in the for the protection of their customers, they do not disclose or confirm security issues. a senior engineer joins me now with more. we also have the founder of a security group that has been covering security vulnerabilities for 12 years. i will there with you, alex. how big of a problem is there? my iphone, as i understand it, someone could see all of my tax and swipes and browsing.

>> absolutely. people have a general idea that these devices are impervious to hacking. they think it is possible to take them over. apple has taken care of security so you don't have to worry about that. attacks against the bones have been so low compared to the entry platform. people get the idea that they are secure. mightmight be that they be a little less careful when they install applications. flaw.l me about the >> it is a vulnerability in the operating system that allows people to break out and gain permissions on your phone. apple tries to prevent your applications from doing certain things. when you actually cap keyser numbers, they are reading that raw data. this allows the hacker the ability to do that. it can record all the thumbprints on your scanner.

how big a vulnerability would that be? 7 thing laste ios flaw,plus the os x off -- it sounds really bad. >> everyone runs on iphones. most people are not running any sort of application on their macs. they have this idea that apple will protect them. >> you have been working with apple on this? how responsive it again? inthey are one of the best taxing things very quickly. the security model of them packing a system before you install it, that does not exist for other services. they have a whole workflow of security. they are better. >> according to you, you discovered a major security

lines hinder, which as i understand it, would allow bad actors to track down the exact location of someone using the service? >> absolutely. the flaw allows you to triangulate someone's exact location as they used the mobile dating cap tinder. you can track someone at the used it and moved around. >> you contacted tinder about that they solday in 48 hours. you say something different. >> i don't know behind the scenes of what they did, but from my understanding, they fix that shortly after and he did not give us details of a fix, so we had to check on our own. cap we checked, it appeared -- hatched -- patched. >> tinder says --

they say they do not know any situation where people are actually using this information to try to find someone. policy.go back to this apple has released short statements, but i saw a headline today that talked about quote -- silence" soening should companies be more upfront? >> absolutely. apple has had information about the vulnerabilities and did not disclose. there is a vulnerability window. >> what should companies do? they have to balance not alerting all the bad actors out there that there is a problem before they exit that takes it -- fix it? these fixes and

getting them out as fast as possible is the right way to do things. once you fix them, being upfront with your user base. saying, this is what happened. like thisnerabilities been out there all this time? >> these vulnerabilities have always existed. some companies have been in the press were for vulnerabilities in their software and they have come up with programs to contract with large security enterprises. trustedt will give people the information about vulnerabilities. >> apple has prided itself on having the best security out there. did they drop the ball? --you are not in your head notting -- nodding your head. >> this is the worst flaw i have seen. it allows all secured traffic to go through.

>> it is just as bad as you would expect. you wonder how it was discovered. somebody must've been asked weighted by. that is a complete circumvention. >> when will this be safe to use? >> i expected they will release a quick fix in a matter of days or weeks. >> weeks? i don't want everybody knowing what i'm saying. will it really take that long? >> there is a whole process. the fix is very quiet. but you have to go through the whole all the best quality of strengths -- quality assurance process. >> i will be careful. thank you guys so much. thank you for joining us today. still ahead, how do hollywood directors use whatsapp and

facebook on and off the set? we will talk to a man in charge of some of tvs biggest hits. that is next. ♪

>> welcome back to bloomberg west. i'm emily chang. the next netflix original series is coming to new york city. they are filming a live-action tv series with disney. there will be 61 hour episodes. andrew cuomo announced that this is the biggest production deal in new york state history. and sticking with hollywood, one of twitter's earliest backers include a well-known hollywood director will not he has directed over 100 hours of television. he has invested in some of silicon valley's hottest startups.

jon erlichman joins us live from l.a. with more. did i pronounce his name correctly? >> at that. if you think of a tv viewing experience, it is changing a lot. people are not just watching a show, they want to talk about it. he is very familiar with that and now he is incorporating it into his latest rocket. you are a guy who is clearly comfortable directing a tv show and at the same time investing in startups. tell us how that came to be. >> i have a great history of investing in this company. i have followed him throughout his work. on becauseved early there was an immediate understanding that there be a connection between twitter and hollywood. we did not know what it was, but it's fun to go back to early e-mails in 2006 and see that all the things we were talking about have now become standard.

the ongoing thing that we try to do is how do we bridge that gap and continue that conversation year-round? >> you are talking about is stone, one of the cofounders of twitter. talk about the way you have been able to use social media and other platform with leo to get the word out and help make the story a more interesting experience. >> i love the buyout you guys did on me. i was like wow, you guys may be some cool. thank you. i am eager to park right now. griffith park right now. it was the first content-based app. fox discontinued it. banshee, id on to began to canvas to create

something that would be social. it was important for me out of the gate. the first season did not air until 2013. it was anticipating where the audience would be going and how well the viewership would go. we wanted to be able to quickly follow where things were going. that goes for all of our social efforts. they all tie to the storytelling of the show. we do not use social media as a marketing tool. it is content delivery and storytelling. by default, that and the marketing us. it is a great collaboration. they are my partners and storytelling. any creative execs in los angeles. >> let's talk about the evolution. everyone is discussing these books -- facebook's urges of

whatsapp. should we be thinking of messaging apps as art of the tv or in down the road the same way twitter has become a part of the tv experience? >> is a good question, but i do not know that much about whatsapp. i primarily for my focus on twitter tonight the twitter is being a true second screen experience. ofis where the conversation an episode is happening. diving into that stream is phenomenally exciting on a friday night. we have unprecedented participation. isfriday nights, everyone piling in to watch the show, but it is twitter furthering our multiplatform storytelling. that is really the key to banshee. all the places people go to get content. social media is at the heart of that.

euros, anounced that show with you directed, is going to come back with a miniseries. networks,oadcast would you think about this need to do a lot more big event programming to keep people interested and to keep them interested and engaged, knowing that they are up against? >> it was exciting to hear that euros would come back. i had a great time on that. aalways think there is certain excitement. that taps into the way people get when they are away from a marine -- movie franchise break. -- movie franchise for a period of time. we are off the air for eight months of the year. when we come back on, i tried to keep the people that are loyal to the show up to date and involved with our production. way through until we start airing again. it is a round-the-clock job.

the event is as good as the show itself. creating an event will not matter unless there is something there to back it up. for us, we followed up with .snshee.com and using hashtag all these places were people go to get story. there are so many places where people can engage a story. >> interesting stuff. thank you. the executive producer of the cinematic show banshee as an early investor in where. i thank you so much. we will be right back with more of bloomberg west after a quick rate. that rate. -- break. ♪

>> welcome back. 1.3 million young people drop out of high school in the united states. one nonprofit is trying to change that.

they teach entrepreneurship to disadvantaged students in the d.c., andwashington, other areas. ld goingof bills -- bui to be here in the studio. so may people in tech support you guys. teaching kids entrepreneurial skills is the key to keeping them in school. >> peoples of port us into because of the power of entrepreneurship. we have been really fortunate that our supporters span from early entrepreneurs to new entrepreneurs in silicon valley. we have found that entrepreneurship is a powerful vehicle to becoming successful. it forces people to take risks, fall down, and get back up. not inspired are by high school, but they are inspired by making money. >> you are teaching them how to make your own businesses. why would that make them stay in

school, rather than drop out? >> it is all about making school relevant. for lower income students, high school has no meaning. if you can show the learning math will help with making money and how writing a business plan can be help full, and we have an amazing mentorship plan. they get role models who have gone from high school to college and on to success. >> you are in 20 schools across the country. you are trying to get to more. >> we think it is a critical time for bills -- build. everyone is talking about getting through high school and entering the workforce. in academia, everyone is talking about the importance of resiliency. all of the skills that entrepreneurs typically have. we feel like we need to embed our program in hundreds of thousands of schools to serve millions of kids. we are trying to stem the dropout tide. >> what is your success rate?

>> we are very excited about the fact that 99% of the kids who go through our program graduate-oh. 90 for -- 95% go on to college. we are serving students who are disadvantaged and disengaged. entrepreneurship has inspired many net -- ignited their passion for school. i i have seen kids from your programs speak and it is incredibly moving. i have been interested in you guys since last year. is a ceo frome contrast, what kind of support do these people give you? did they give you money, do they give you time? >> we are selfish and we ask for everything. they invest in our program, but they also give time. these are role models for students. i believe that some of these entrepreneurs did not all of high school, but they all loved

creating something and innovation. that is what we are training our kids to do. not each child will become an entrepreneur, but we wanted to have that entrepreneurial mind that -- mindset. entrepreneursthe see themselves and our kids. that's your big fundraising gala is his weekend. they are auctioning off an internship with interest. i would love that. >> we are really excited about that. it is an opportunity for someone to have a week with the ceo of interest -- interest -- pi nterest. we are hoping it goes great time and money. >> we will be there covering it. thanks so much for joining us today here on bloomberg west. thank you all for watching this edition of the show. we will see you tomorrow. ♪

back from bloomberg world headquarters in new york, i'm mark crumpton. business andion of economics with a mainstream perspective. u.s. lawmakers credit -- questions credit suisse officials. sales reach a five-year high. fast food restaurants cook up on expanding breakfast menu. to our viewers here in the united states and those of us those ofs joining -- you joining us from around the world,ha