>> live from pier 3 in san francisco, welcome to "bloomberg west," where we focus on innovation, technology, and the future of business. i'm emily chang. ebay is the latest company to be the victim of a cyber attack. hackers broke into its database and has gained access to customer information. we will take a look at how companies can fight back. and john chambers sits down with us for an exclusive interview. he asked about his campaign to curb nsa surveillance and why he thinks cisco could be number one in security. first, a check on the bloomberg top headlines. a company has set its ipo share at above marketing range. jd has not turned annual profit,

unlike alibaba. twitter has elected all of its directors, including the first woman to join twitter's board. the announcement came at twitter's first shareholder meeting. they hit a high in december. and lenovo has a strong quarter. their laptop and desktop shipments rose in the quarter despite in overall industry decline. they are making a dent in the smartphone business with its smart phone chip. 60% in the quarter. welcome to "bloomberg west." i want to welcome our special

guest host for the hour. also, longtime head of facebook growth. great to have you here. >> great to be here. we have started to figure out -- >> remind us though. >> what happened is i bought a company. we did a controlled transaction of one company and inherited ownership of tinder. when valuations get crazy, it it is addressing to look at doing different transactions. we are looking a buyout and controlled transaction.

it has been an interesting year so far. >> before we move on to that, what is the valuation of tinder. >> in the rate of half $1 billion. it is a fair number. the original number was $5 billion and that was wishful thinking for everyone, including myself. we were quite happy with how everything turned out. >> where can you find about you? what areas are you looking at? >> what is interesting to me is that there are businesses that right now are getting starved of capital because they are in this weird and awkward growth phase. companies that are going by what hundred percent profits -- and the companies that are not growing or dying. people do not know what to do with them. for us, it is an opportunity to not just do a typical fiber 10 $50 million transaction.

get them growing and take them back up. >> i went to get to our lead story of the day. i know you have been following ebay in asking users to change their passwords as a precaution after their systems were hacked. the hackers gained access to customer information, including passwords, birthdays, and addresses. they also compromised a small number of employee login credentials and have gained access to eb central network. ebay says that there is no evidence that unauthorized activity resulted from this breach. our guest joins us on the phone. he studies techniques he used to compromise networks. how do you think this attack happened and how bad is it? >> typically these things are going to be coming in through an employee.

it is easier to find someone who is willing to click on a bad link and open an attachment. went to get inside the network, you can start rooting around looking for all of the important databases. early indications are that was the model that was used here. it is a difficult one to defend. >> doesn't this speak to a failure of the ability of the check and balance of ebay to protect their users? >> it is a good point. what is a good sign is that the databases that help credit card information seems to have been separated on the ones that held other personal information, which is a good thing. you do not want to get payment information stolen. in terms of other internal controls, that remains to be seen. i certainly think the state of breaches we see enough of these now.

we know that the first breach where the bad guys get inside, that continues to happen. we definitely need to have better controls and making sure that the bad guys cannot get out with the crown jewels once they get in. they need to do a better job so that they cannot use the data that they eventually steal. >> it seems that everyone is waking up to a cyber attack. target. neiman marcus. heartbleed. should ebay be held to the same standard as target? >> yes. was ultimate end of that series of events at target, was that the solution to the problem? i have known john for a while. he is the most exceptionally him honorable amazing person in silicon valley.

how are they figuring out what technologies they should be using so that there are one or two steps ahead of these hackers that have an increasingly extensive to try to hack them and frankly every other company. >> do you view this as a massive failure on ebay's part given that so many companies are facing this exact same issue? or not? >> no. i do not think it is a massive failure. when a breach happens, something wrong happened. from what we have seen so far, this doesn't look like it was anything negligent on ebay's part. we will learn more as time passes. the real important thing to remember is that the first layer of the breach where someone gets infected, it is really difficult to make sure that no one that works for you ever gets compromised.

that is a really tough job. what i do think the industry can do better is not only when you find a breach, you let people know quickly, but we also need to be looking at other security technologies beyond just how to keep that first piece of malware out. what we do for the people that are infected with malware, how do we make sure that they do not become an entry point into the really important things inside the network? that is something that i think is both a responsibility for the enterprise, prize, as well as a security to help fill in that whole. >> williamson, thank you for joining us. coming up, the state of the industry.

i love hearing your opinion. that is coming up. and you can watch a streaming on your phone, tablet, bloomberg.com, and apple tv. ♪

>> i am emily chang. this is "bloomberg west." also, my guest host is here. chamath palihapitiya. i want to start by asking you about facebook and all of the acquisitions they have been making. does it all make sense? >> i think most of it make

sense. having been there through a handful of them and announcing them from the sidelines, what has turned out to be the cheapest and smartest acquisition done by any internet company -- >> you think whatsapp could be bigger than facebook? >> we have graded a growth team and social capital. we use that to help companies grow. we also help them figure out what is going. -- what is growing. when we do our own internal projections, by 2015, whatsapp will have more users than facebook. you're talking about a global phenomenon. when you look at facebook and you apply some reasonable discount to that, apple will be worth multiples more than the facebook paid. >> john chambers said this a few days ago. if you as a stalwart company for

not figuring out every day how to get into the next phase, you're going to die. you do not want to be the company five years later with just a bunch of cash and no ability to innovate. if you do come in and up like microsoft and unfortunately, cisco and hp. there is a gaggle of these companies that do not know what to do. as a result -- kudos to zuck for having the courage to do that. >> and -- >> that to me is a head scratcher. and makes a lot of sense. it could be the next platform. at least facebook has it. if it isn't, they can keep going. >> how likely is it that facebook will remain the dominant social network?

>> i think because of whatsapp, it is basically locked in. it becomes the dominant consumption behavior. you will see everything from transactions and payments, a lot of things you see in places like china and japan will get brought over to the rest of the world. there will be this massive pop from that enables it all. >> what about snapchat? >> it is largely team oriented in the u.s. >> google is buying a lot of robot companies. they are competing and trying to connect the world in different ways. >> i think the proposition is very different. they said they would organize all of the rules. information is getting generated in all of these other places. you are unlocking situational data around the home. your unlocking all of the

spatial information that is used to inform maps and get people from a to b safer. >> and glass? >> they realize the world's information is no longer trapped on the internet. the information exist everywhere. their job is to use all of the cash from search to go and basically get the information business anywhere else. >> what about apple? >> i think these guys have lost largely there mojo. if you see this acquisition, it is a head scratcher. you're barring a hardware business with low-margin comment doesn't make sense. some people so when i tweeted that, they said they were buying the music service. you could buy spotify. it doesn't compute for me. >> what if they come out with a

larger phone or a smart watch? >> i think it is all marketing. -- all more of the same. but we are seeing with the success of netflix and spotify, things are moving to the cloud. it is moving to place were it is available all the time everywhere. these devices are getting cheaper and they are becoming more extracted and becoming more available. being in that business is a race to the bottom. you have to find a way to go up chain. -- upstream. use the balance sheet to buy the winners in software. buy spotify. buy netflix. those are the winning strategies. >> much more with you coming up. stay with us. also, quick programming note -- tomorrow we have an exclusive interview with the intel ceo. we have -- he has high hopes for intel chips. he will tell us why tomorrow right here on "bloomberg west."

still ahead, uber and pinterest all with high valuations. do they deserve it? ♪

>> welcome back to "bloomberg west." i am emily chang. with 11 i figure funding rounds in the first quarter or 2014 alone, is it possible that fundraising that fundraising is getting too easy? there's a collaboration platform for enterprises that raised money. still with us is chamath palihapitiya, founder of the social capital. thanks for joining us. our guest is an investor in your company.

how is it different starting a company today than it was with flickr a decade ago? >> is started in 2002. there was the dot com crash and 9/11. it is impossible to raise money. we were working on a game. flickr was a last ditch effort. in one sense, we were lucky there. it was entirely different. >> is it too easy to raise money today? >> i think there are a lot of companies that are not raising any money at all and there are some in which i would say to take a step back. the enterprise per portfolio, we have probably done about 20 or 30 deals. we have a great practice.

of all of the companies we have seen, when he walked into the door, these growth characteristics is that it was applied to enterprise. >> their company is promising to eliminate e-mail. how? >> e-mail inside the organization. having everything visible to everyone rather than fragmented into different muscles. it is a huge advantage.

>> on the surface -- take away the nuclear growth. even more important, it just changes the organizational psychology of the people that use it. there's less internal politics. there is less little e-mail threads to train people. everything is more transparent. it is all out there. things are more logical. people operate in a more relaxed way. i think has profound impacts way beyond the revenue the growth in all that. >> talk about something that might be illogical. valuations at large. >> i think some are insane. they do not make any sense. >> here is what i mean by that

-- when are you and ask me about pinterest or uber, they say they don't have a comment about that. complete monopoly. it will get to one billion users. doubling every year. 90% margins. you can buy it at four times. if i can buy that for a $15 billion market cap, i do not know if linkedin is completely mispriced or what. [laughter] i won't -- i'm not smart enough to know. >> ok. i want ask you. what do you think? >> it is so hard to tell from the outside. you do not have a really clear picture. for some, it is really tough to say. was it worth it to facebook? maybe.

you can take into account the strategic value. >> very complicated. flickr cofounder, thank you for joining us today. we will have chamath for the rest of the hour. coming up, john chambers. i will speak to him about concerns during our exclusive interview next on "bloomberg west." >> time for bloomberg television on the markets. the markets ending the day higher after the release of april's fed minutes. policymakers continue stimulus to push unemployment lower. a check of the board shows the

dow is up. s&p up. nasdaq up. for on the markets, i'm mark crumpton. ♪

>> this is "bloomberg west," where our focus is on technology and the future of business. i am emily chang. john chambers is worried that nsa surveillance can have an impact on his company. he wrote a letter to obama asking him to curb the nsa program. there is a new book that the nsa hacked into equipment before it was shipped overseas customers. a cisco conference is happening right here in san francisco. we have an exclusive interview. cory? >> yeah, emily. john chambers -- this is an

interesting gathering. john chambers joins us now. >> be careful of age discrimination. >> i hoping no one will start that with me. >> good to see you. >> tell me about this event and the type of customer. >> absolutely. it is 25,000 people here here it hundred thousand people online. it has everyone from the network engineers and the cios. the key takeaways from the event is that innovation has been the strongest it has been in a decade. we have new high-end switching. for the first time, the customers got it and so do the financial analyst.

we will embrace concepts and now you can watch the financial analyst minds go off. what i enjoy most is the time with the customers. >> you are really hearing from customers. >> in many ways. >> it seems to be the hottest idea in the world of networking right now. the way i think of it is i think of it as if i'm with my family in a car and then my wife and the navigator decides to take a turn and go over here. let's offered in and change something so as they go through the network and off the highway and find a different route, the needs changes as i go and the

software defines all of that. >> the concept is absolutely right. think about the software is a virtual layer and you have your physical layer. people are learning that they are costly. we have embraced fdm. and analysts got and the customers got it. we got several customers on stage yesterday. each of them talked about how the structure brings, and policy. a huge competitive advantage. then we talk about security. we take it to a whole new level with a desktop device that is probably about the size of a notebook and we combined the android capability with the ability to have world-class touchscreen. that is just the device. >> it seems that the very notion

sits on the argument of the storage. we will have a storage so specific that the direction will be decided before it leaves the network. is that fair to say? is it one or the other? >> i don't think so. you will see us put that in. most people would not consider it comes pressure after the session of the last 48 hours. we have got the advantage using your words of of stability and having the advantage of when network do this. there's a common policy not just in the data center, but all the way to the edge. >> people were talking about security. i want to read part of the letter. i thought it was really powerful. you are more specific than just about any ceo was saying that there might be a strong impact

in the sales because of the nsa policy. another said they simply cannot operate that way. the customers trust them to deliver the product and meet high standards of integrity and security. what are you hearing back from customers outside of the u.s. about the impact of the nsa activity? >> that would not have written that letter it was not buy a book. in theory, there has been no follow-up on that being used to practice on how you might intercept products. i want to take a step back if i may very i was the vice chair of the national superstructure advisory board after 9/11 for several years. >> and you spend a lot of time in the white house. >> the key take away is that if you told me we would go 12-14 years without another attack on american soil, i would say that is impossible very the government has done a good job protecting us.

if you expand too far, -- that facebook's and the googles and the apples, there is a state of proper conduct. it is a wild, wild west. i'm not big reticle of the administration. -- critical of the administration. we have to take a step back it with other governments around the world come here is how we move forward together. how do we position it so we do not affect the supply chain? the supply chain in terms of how you move products out and give it to the customers. i think the importance of protecting the security is most important. >> and the business impact? >> the business impact in china and certain other parts around the world are hesitating. you never needed to impact on it. >> the nsa is stalling?

>> what i said is that people do not trust us. then we have got an issue here we need rules of conduct going forward. it is the ability to look at how we have become the global internet and how every country benefited from it. you need a consistency that you can count on, much like companies back in december. there is a transition -- we are moving to become the number one security company. the only way you can defend this is from the cloud to the data center. when they were getting pushed on the security, they said you can always solve it through the network. a year ago when we said we would become the number one security company, they said, maybe. i have done three acquisitions. we are moving rapidly in architecture that brings them together. we are going to move and view

this at how can the network really provide a security in a way that no one else can. hopefully cisco will become the number one security company. >> we have known each other for a long time. what do you see coming down the pike? >> it is interesting. you want to always listen to others. the ability to play out that game is to look at the endgame. you have seen the movie and the variations of it. the disadvantage is what a competitor said. they said, john, i want to congratulate you. that is why i think the ceo should be in the job for five years. we do not reinvent ourselves

every four or five years. your company and your culture and you as a leader have been able to do that in ways that others do not. i thought about it for a second. how many leaders did you have? the answer is only one. this is where i think there are companies or individual leaders. it used to be three or five years. now it is every three years. what cisco will tie to do even though people give us unbelievably good grades, we will increase that. we will see if we can reinvent ourselves one may time. -- one more time. >> one more reinvention for you? will we be sitting here 19 years from now having this conversation? >> the next time you hear from you is when i will be announcing my successor. we have got a strong team. a number of people can replace me and do a better job than me

and my job is to make this like your family. i want my family to grow up and do even better. >> john chambers, thank you. the ceo of cisco. >> thank you so much. tomorrow we will be speaking exclusively with the intel ceo. find out what he thinks intel can reboot its future by entering the maker market tomorrow on "bloomberg west." ♪

>> welcome back to "bloomberg west." i am emily chang. stanford university says its online classes are used by millions around the world. harvard says it is all in for online education. what is the future of education online? an investor in treehouse ryan

carson is here. some haven't gotten a lot of love. we are top-of-the-line figure rounds of funding. why? >> some are cyclical good number in a phase where the enterprise company is big. we will go through a phase where health and education companies look at it. our prospective is to do all of these great investments now when no one is looking and when everyone is paying these crazy prices, we will probably be selling. >> treehouse, you claim you can teach anyone and they can get a job at a start up or make their own website. you're telling me i can get a job. >> believe it or not, yes. we're taking people who are no degree and experience of putting them in real jobs. they are making at least

$45,000. they have no experience at all. >> you think this could be a real solution to a quality problem? >> yeah. he as addressing a fundamental need a people have which is they want to know that there is social mobility. even if you're born poor or uneducated aren't healthy, you can become healthy and be educated. you can get a job and you can thrive and make money. everyone wants that. building the services for inanity has a massive economic and if it. he has got some 70,000 students. that is the largest computer science university in that world. >> there are not enough people for the jobs. you cannot produce enough computer sciences in the world to fill all of the jobs.

there'll be when million unfilled jobs is widely underestimated. no one talks about mobile or wearables. everything will be software. everything. we will need millions of people to do it. they do not need degrees. the do not need big skills. >> do they learn how to code like a language or they learn math. >> they should be thought of as a second language. like if you will learn three languages. learn english, spanish, and some coding. and i think you have a job for life if you do that. >> what has been a quality issue. here in san francisco, you have people complaining about google buses and people getting priced out of market moving outside of the city. >> i grew up with parents that did not have great jobs.

we were on welfare for most of the time. i didn't go to grade school and then i got lucky. that is fundamentally what happens. people should be in the same position i am in. when you meet people and they are protesting, that is what they are expressing. they are expressing they don't have a chance. when you make them happier, society is more stable. that is how massive businesses will get built. this is the only place we should be spending time. this is where all of the value will be defined over the next several years. >> do think that could really replace education that you have set? >> absolutely. you can do it in your free time. we are talking about moms and dads who have no time. they have no chance. he can't go back to college. he can't get a degree. they cannot get any experience. there is no way accept online. -- accept online. it is perfect.

>> and redefining education -- learning in a way that is personal for you. you see what codeacademy has done. allow people to empower themselves. it is amazing how dutch motivation people have to better themselves. they want to have access to tools -- it is amazing how much motivation people have to better themselves. a1 access to tools. >> all right. chamath palihapitiya and ryan carson, you guys have got a big responsibility here. >> i know. >> thank you. coming up, netflix makes a big push. we will tell you which countries are getting an online video service. ♪

>> welcome back to "bloomberg west." i am emily chang. our special guest host for the hour, chamath palihapitiya, is still here. we are talking about netflix expanding its on-demand empire introducing it into france and other european countries. it is the biggest expansion in years. amazon offers a rival service. the first wave of shows will be from hbo and are now available to watch. jon erlichman is an l.a. what is the most significant about this international expansion for netflix? it is the most significant expansion they have seen in three years. >> is a huge opportunity for them to get subscribers. what do you need as a tv network? all sorts of programming. you have to make it, go out and buy it. you also need people to watch it. they had more than 48 million

subscribers at the end of the last quarter. clearly they're looking for people who can consistently pay for their service. that is why they are launching these european nations. they really look for markets where they can find people to pay as opposed to where markets have piracy is a issue. they may not be spending as much as netflix, but there have been some estimates that the hbo contract might be in the neighborhood of millions of dollars per year. they want to get people to buy more stuff through amazon here. >> what do you think of a company like netflix? 48 million subscribers now. they take up 34% of internet traffic at the peak time. >> it is an amazing service. we're large shareholders of that company. the view we came to is that we are moving to a world where

these physical pipes are largely valueless and they are getting replaced by people building companies like netflix where you're putting together the experience that we want. on-demand and interesting content and original, great programming at a cheap price point that is available everywhere. that is what we want. i don't want to pay $150 a month for comcast. >> and comcast and at&t. where does that leave the big guys versus the little guys? >> there was a rumor that google would try to get nfl access rights and bundle that. right now there is no reason why you would want to be digging up the dirt to put physical, raw pipes on the ground. >> there'll be apple flying around. >> that is why net neutrality is a red herring. you see what apple just

announced today. all of that -- we had lived in a world where massive innovation is happening. there will be drones in the sky. lasers. >> when? >> probably in the next five or 10 years. we grow the pie and net neutrality will be important. fortunately, there will be ways for them to win here it. >> drones and lasers in the sky. did you hear that? a vision of the future. jon erlichman, thank you. it is time for the bwest byte, where we focus on one number that tells a whole lot. cory johnson is that this is go conference. it better be good. >> the byte is 1.7%. this makes it two years in a row

and three of the last four years that they have won the number one pick in the upcoming draft. >> this is your chance to talk basketball. >> three out of four. >> by the way, i should mention that chamath is the owner of the golden state warriors. >> the new manager of the warriors. >> well, listen, winning the pick does not have much correlation with winning a championship. the second thing, that candidate will be an amazing coach. >> quickly, donald sterling. >> he is a complete clown. by the way, one player, we love you. come to san francisco. >> it has been a pleasure having you here on "bloomberg west."

thanks for watching. ♪

>> in tod