>> live from pier 3 in san francisco, welcome to "bloomberg west," where we cover innovation, technology, and the future of business. i'm cory johnson, in for emily chang. comeback trail, or is it dying a slow death? is it too late for the silicone valley pioneer to turn things around? amazon fuels the fire in its wille with hachette, we look at how this standoff will impact the publishing industry. first, a check on the top headlines. google is developing a new tablet with advanced vision

capability, and something called project tango. cameras,ave two back infrared sensors, and advanced 3-d software. google will make about 4000 prototype starting next month. google has been ranked the number one company for pay and benefits, tech companies dominated the top of the list. this book is number three, adobe number four, intuit is number six. the survey found that software engineers at google have an average base salary of $128,000, slightly lower than apple. atcom founder rang the bell nasdaq yesterday as his company went public. he is now worth $6.1 billion. ofcom sells all kinds products directly to consumers, and is the biggest chinese internet company to go public in the u.s. for now. alibaba might likely surpass that, in plans to go public in a massive deal later this year.

lead story, hewlett-packard facing one of the most critical times in its history since it was founded 75 years ago. sales fell one percent in the this was ther, 11th straight quarter that sales have declined on the year-to-year basis. the company did post a higher profit. stock is gaining partly because hp announced more cost cuts, and additional 16,000 job cuts, bringing the total to nearly 50,000. buting costs is one things, they are having a tough time it, failing to offset the slowdown in pcs. john, this is a quarter that kind of shows -- death by a thousand cuts. >> it is amazing when you look at the ballooning number of cut

that hp over the last couple of years. meg whitman unveiled a huge number of cuts two years ago, at 27,000. it didn't stay at that number very long, within a couple of months the increased by another couple of thousand. 34,000 cutslking by by the end of 2014. they now see that number climbed to 50,000. meg whitman, when asked if this is a confidence issue, said it is not. deep in the weeds about what the company is about. the more you see the operation, the more you can find it the potential to cut costs. that only tells you part of the story. we live in a world where a lot of businesses feel -- are completely ok with the idea of not having clunky hardware in their offices to manage everything. they are taking advantage of the cloud. so you have hp with its servers and software's, and services,

competing with the likes of google and amazon, salesforce and workday. i'm sure as you look through the operations and you see one business, another business, they are necessarily getting the sales they once did. do you need the same sales that -- staff? chart there, us a it seems like you has to be a miserable place to be not knowing who is going to be next when he worked there. up, where were the cuts that led to that increase in profits? >> for all of the knocks against the pc business, business sales of personal computers is still actually a bright spot for hp. we are not talking about big growth or anything, but there is still this need for companies to buy pcs, and that brings cash into the company. thene is expecting that fuel hp going forward, it doesn't even get much mention on the companies conference call.

it's a story of how hp can transition to this new generation, the world of the cloud. >> jon erlichman, thank you very much. challenges,hp crawford del pratt joins us from boston. this wasn't the worst quarter ever, but it seems like -- i have been doing the story for 10 years. ,p putting out a crummy quarter and another crummy quarter. >> it was an interesting quarter. as john was just indicating, pc showed some growth. they showed nice growth compared to the overall industry, and that is indicative of a better product line for hp as well as the cessation of support for windows xp. when you get beyond that, you start seeing some interesting weakness and some areas where there -- where they are really challenged. enterprise group is a big part of that. they are not contribute into growth.

one of the areas that were most troubling to me was the pause that meg whitman characterize around storage. they spent a lot of money on free park on monday have been getting results from that. it's been growing continuously -- >> let me back up and set that up a little bit. three par with the company -- i believe it was 2010, it was a big acquisition battle between dell and hp. hp spent a couple of billion on that acquisition. >> and they needed to. they had an aging midrange storage product line, they needed a comverge storage platform, where you could bring different storage types together. they got it, it has been growing. the whole storage market is kind of slowing, they need to get that market growing and how they grow fast. they can't continue to count on commodity servers being a long-term growth for the business, because we are seeing

so much commoditization, and the move to the cloud. >> we keep hearing about companies that are working designingparticular, their own servers with their own components, bypassing the need for hp. andwould think that hp, even intel, would be beneficiaries of the move to the cloud, because they would be selling hardware to those guys. but they are competing with the cloud, they are supplying to the cloud all at the same time it. >> hp is on this, and they are aware of it. this is why they announced a deal with foxconn in the last quarter. they're going to focus on trying to take advantage of the scale that foxconn brings, but be able to bring an hp branded, and move into the cloud suppliers that are rolling their own. they don't want to pay the same uplift. what does that business look

like for hewlett-packard? will they get any technology services pulled through some of these emerging cloud suppliers when they go to market, and how can they lower the cost going forward? it's a way for them to participate, where they were able to properly participate. >> ira member doing a segment model on these guys a good 12 years ago, and almost all the profits from these business were selling paper and ink. it didn't occur to me that that would go into decline. what is the problem with the printer business? >> what is happening in printing is they have -- a couple of things happened. they underinvested in the product line, it took them longer than they like to get in the color laser space. they had to push the laserjet line longer than they want. they are not seeing a significant enough demand on the inc. side to offset -- the ink

side to offset the deceleration in toner. relate to the services game, which is the business of coming into companies and helping them consolidate their print so they can have 50 or a hundred people using the same printer. is their product line stronger, they are consolidating, they have the services growth starting to happen. when they get that engine going, they will have higher margins ink sales as opposed to toner sales. this is a transition business. for that, they had too much inventory and supplies, they have that more and control now. i believe the print can reemerge, and be an area of growth for the company going forward. >> it's a trick that that comes down to toner. thank you very much, we appreciate it. still ahead, why you can't order the latest j.k. rowling novel on amazon.com. with theattle

publishing giant hachette, next. you can watch us online and on apple tv. ♪

>> is a bloomberg west, i'm cory johnson. up fight withping hachette. forkn has been trying to into betterhette terms with amazon. wrote, your actions to raise the price of our books say that our books will ship in three to five weeks while they're in stock, is a disgusting negotiation practice. it made me tell my readers to

stop elsewhere, and they are, and will. she joins us now via skype. particularly in seattle, this must be upsetting. your local company amazon won't sell your book in the best way they can. >> it is painful, especially because i supported them from my entire career. >> talk to me about how you found out about this, and what the reaction has been. >> it started leaking on the facebook, i through got a b e-mail from the publisher of little brown, who published my book. i went to the amazon site to look my book, and so the evidence right there on the page. do you support what little brown is doing? >> these are two big corporations negotiating, and i

do support they both need to do what they are doing. i just feel that we, as authors and illustrators, shouldn't be used as pawns. >> it seems like the role of amazon is so much greater in the publishing industry because we don't have small bookstores all over the country, we also don't have the same waltons and wardens and barnes & noble because of amazon. >> they have a wide reach. i think a lot of people have become more accepting of ordering things online, and they make themselves very popular because of their lower pricing. that of course is what they are groupto hurt the hachette of authors and illustrators. i want my readers to know that you can order books online from independent bookstores. >> how are you doing this? i look for you on twitter and couldn't find you.

how are you letting your readers know, and what can authors and publishers do to get around amazon? >> truly, that is a business ago jason that i wouldn't even want to discuss. my own grassroots approach has been to use facebook, i am not on twitter. i don't have enough time to write as it is. but i have been reaching out to my friends asking them to share. wrote whenion that i i was extremely frustrated at seeing what happened to my current book. >> you have young readers, have you heard from any of them? from a young heard readers in regards to this, because it is big -- it is their parents were buying the books. my young readers approach win because they love the books, and they have questions they want to ask you not related to amazon. >> they are hounding you for your next book, which you have finished and they can get to. book was in the top 100,

and now it is ranked almost .5 million in sales on amazon. it is available, and i want them to know my other books will be available. i know this too shall pass. >> i want to read a statement from hachette. we are doing everything in our power to find a solution to this difficult situation, one that best serves our authors and preserves our ability to survive and thrive in a strong and author centric publishing company. have they been offered -- author centric. fromey have approached us the get-go and told us what is going on. authors andy, as illustrate it, we are not welcome at the negotiating table, so we don't know what's going on. what we do know is what we see on our amazon pages. that is the only thing i'm going by. i would like to see you go back

to what used to be, which i hope will happen soon. could download your book for my daughter's kindle, but i can't. i will find other ways to get it to her. thank you for your time, and think you for your book, once upon a memory. bloomberg west will be right back.

>> i'm cory johnson, this is bloomberg west. eric sisko was the beasts of the network, their routers emerged as the dominant bricks in the internet speedway. these day, cisco is much more than a slinger of internet boxes. i caught up with their chief marketing officer at the cisco

live conference. i asked her to describe the new cisco, and there is an epically odd photo bomb. you have been warned. >> this is exciting for us, it is our 25th anniversary. our first one, it was right when the first wave of the internet hit. years, 200,000 will be joining us online. it is been a fantastic event. they come to learn, they get certification, development, there's a 24 hour hackathon where they work with our experts and create together. it is five days of all things i.t.. >> i understand the numbers are different, but how did the customer base look different than it did even five or 10 years ago? >> 10 years ago we had products that fit onto hands.

today we have traditional i.t. engineers, network engineers, switches, routers. but we also have security buyers, application buyers, the amount of buyers in the number buying opportunities have expanded because our portfolio has expanded. >> i described this as the last of the.com bubble, where technology became technologists. there is an ability of technology to reach every consumer, at least in the first world. >> hey guys. hey john. >> so far, she is knocked it out of the park. i was just saying this is a different era of technology. >> are you sure you don't want to jump in? >> world-class photo bomb. >> nothing like your boss jump again during an interview.

it the internet of everything, where people process eight and things all comes together. it has huge and location for businesses. you're trying to drive business outcomes, not just amazing technology. we have a ton of customers here using their tech to share with attendees. >> give me an idea of places in his this is that have been affected by technology. >> the thing about retail -- the number one thing about improving retailers improving the customer experience. one of the worst customer experiences you can have is waiting to check out after you have been shopping. >> the numbers are kind of amazing, -- >> they go online and say more cashiers needed. you put yourself down and you leave. we are working with retailers today to put sensors in the parking lot, sensors around the store, so they know where the traffic is going. so they can predict when those

lines are going to get busier, get people to the registers, so you can have a smooth customer experience. -- two thingsned happen, or every second they reduce the waiting time, they generate more money. the technology is seamless, no one needs to see it. >> is that a networking product? software, stephen have conversations around the product. you also have the process change, because you have to train your employees to understand what to do, and when to do it. as the role of the chief technology officer has moved closer to the ceo, do you see that moving closer to visible mentation? forhere's only one place all of this touches, that's the network. software, the network, if you can combine that with the analytics about the individual,

that is pretty powerful. network engineers are the ones who are in the middle of it all. >> in terms of using acquisitions to get yourself to that place, you guys are performing some of the most successful acquisitions. does this find people who are working on new things? >> yes. we have an investment pavilion downstairs, which is all of our startups and early investments, the leaders from those organizations are here to share with our engineers. hackathon, doing a which is giving us all sorts of insight on what we need to improve. that gives us an idea of what we need to build ourselves, or go out and acquire. >> there was at least one photo bomb -- there may have been to photo bombs. that was where christie. manages offer is growing

quickly, but how will they hold their spot. we will talk to netsuite ceo when we return. ♪

>> you are watching bloomberg west, where we cover innovation, technology, and the future of business. i'm cory johnson, and for energy -- in for emily chang. it is one of the leaders in enterprise software, how does that suite leverage its connections to get more market share? joining me now, a big oakland a's fan. when they look right behind the catcher, they might see you. >> all you see is netsuite logos.

>> talk about your customers. , i look atou guys deal size when you guys announce earnings. what is that say about your customers? >> at the beginning of our history, we were typically very small companies. you do see next generation companies, the go pros of the world. the adjusting thing that is happening is mainstream companies are shifting their infrastructure to these new cloud-based architectures. williams-sonoma role is out outside the u.s. to be there, spot form. us state of texas is using internally, they are using us to serve all the agencies within the state of texas. the largest carpet manufacturer in the u.s., when they moved manufacturing to china, they did it on netsuite.

you are seeing the second wave. mainstream companies are beginning to move their structure. >> this is why we created the show, the notion that technology is not just for technologists anymore. it is not just for tech anthony's for buying tech from other tech companies. when we look at the results from hp, that we seek and -- but we can see that struggle. they are responding to companies with lower costs in the cloud. >> hp has smart people running it, i know they will be able to respond to the challenge. it is really the challenge every company faces, whether you are a technology company were not. every company is becoming a cloud company. learn topany has to use this ubiquitous network to service customers in new ways. the customers is defining how

they want interface with companies. they want interface through a phone, worth saying that. you are embedding technology in you canngs, your car, order new wiper blades when they get low. when we think about the internet of things, we have things acting on the behalf of the owner of the thing. all of this is causing massive disruptions. you want to make products service enabled, but how do you respond to these sites -- these types of service related people and products? thatve me a service story may not have been typical five years ago. >> certainly things like the carpet example. grandfather had a carpet store in western michigan, so i know the carpet business. the shaw story was great because they have a big infrastructure based on traditional erp systems in north america.

the club was putting pressures, the opportunities the cloud was giving them to expand globally, they look to china. interestingly, when they went there, they said they are not going to take the older structure. we need a new agile infrastructure. >> the history of that was stuff being manufactured by hand to machines making stuff in north carolina. they are used to that kind of change. but interestingly enough, when they first looked at systems, netsuite was not on the list. they look to traditional systems. , others.sap >> they added netsuite, and we ended up winning. i don't mind not being on the first list, i mind being the last name on the list. >> what couldn't they have done

with sap? >> it's time to value. we were up and running in six months and not six years. there ist because giant implication ash and limitation. >> the real benefit is how much more flexible it is than these traditional systems. you can get in quickly, traditionally people thought these cloud-based systems were not as flexible as these large systems. it turns out they are more flexible. you can change your business in real time. >> change what? >> you don't have to take a year to propagate a change through systems. butto be too arcane, because we were running our software for companies, and every customer wants to customize that, we had to have the ability to upgrade customizations as we upgraded the software. that's the problem with legacy

systems, once you have some eyes them it is hard to change them. >> some of the systems are sold by hp. these companies see falling sales. >> our revenue growth has accelerated for the last few quarters, and sap's licensing revenue has fallen. >> you have gone from nine percent yearly sales growth to 34% sales growth. to what do you attribute that? >> i think a lot of it is the move to the cloud. at the end of the day, when you put a system like netsuite and, it's the heart of the company. no one does an elective heart transplant. something is changing in these industries. in retail, and manufacturing. they have to figure out how to retool their infrastructure to be a modern company. the system builds on the cloud is a necessity to be a modern company.

systems before the clouds existed, you can get through the firewall to get to the systems. if you are running your business on a system that doesn't live on the cloud, it won't be very effective. that's what you're seeing, that move to traditional -- from traditional to the cloud. >> you can change a fan belt when the engine is running, but it is harder. when you weren't looking, the senate may have just killed .atents trolls we will talk about patent trolls and their hefty tolls, next on bloomberg west. ♪

>> i'm cory johnson, this is

bloomberg west. we are streaming on your tablet, your phone, bloomberg.com, and who knows where else. patent trolls, you have heard the term. are they innovations worst enemy? this video helps define patent trolls. >> they are called patent trolls, companies who have acquired the rights to a patent but don't actually sell or produce anything. they build patent arsenals collected from failed startups and defunct big tex by -- big tech companies. once they build their arsenal, they go out for blood. they target companies with similar patents. , and mostten lawsuits are settled out of court. all the patent licensing

suits filed, many of them were from these patent trolls. -- this week, the senate took the reform off the bill. what you make of this bill getting killed? is news, buts trial lawyers influence in washington is alive and well. is, theref the matter is money on one side, and money on the other. guess what? the stack of money that his biggest wins. >> what would this bill have done that won't happen now? about patentity regulation is how it works. knows work because no one who they are, who is paying for them. as soon as you have to expose those things, now all of a

sudden it becomes much more difficult to be anonymous. anonymous is what makes patent troll models work. in 2011, wethe show talked about the america invents at, i thought that was going to solve these problems. >> it did one good thing, it made the u.s. play on the international playing field. that is a good thing, we needed to make sure we had patents that work across europe and the u.s., and the rest the world. but he didn't do anything to really address the fundamental issues of anonymity, didn't dress a lot of these issues that make trolls work. got ad to be that if i patent issued, the presumption was it was just valid. after the american invents at, there is a mechanism that people can say i don't think he invented that. there is a mechanism to say this was an innovative, the patent shouldn't be issued.

that is a good thing. that improves quality. , what wasnovation act in that that would have made things so much better, and why was the house able to get it through? if you would have said bipartisanship was going to happen in the house and not the senate, i would have gone that is not even possible. but in the house, people realize that the frictional costs of this anonymous role problem, and you don't know who is suing you, so you don't know if it is a real threat or not -- that anonymity is what is killing business. try and is really to figure out who was the beneficiary of the fight. -- it can you really know can get so impossible when you have a tiny minority interest /. i these just single friends with one owner? shellll find another behind another shell. >> that is a big problem,

ultimately figuring out the real party of interest is a really interesting esoteric principle. you know from corporate accounting, knowing who's a sub is whose sub, is an impossibility. >> have you seen the circle within a circle that shows you movies things are? >> you know at some point be beneficiary is not going to be disclosed. you put the allegation on the asserting policy. disclose who i am, what is it for me, and what are importantly, how deep is the pocket that i am fighting? if i'm the defendant, the one getting sued, i'm going to be in a situation where i know -- i have no idea whether a settlement is a settlement is necessity or if i can fight this thing and when. win.ght this thing and >> if you have a company in seattle that creates a shell

company, and the shell will file suit against apple, and apple will say i don't know if this is a shell that is important, or if i'm going to deal with this giant company in seattle. >> the courts are actually listed in the costs in that situation. so expensivemitted to get this resolved, settlement is cheaper then actually figuring that question out. because of that, the troll model is so still alive and well. not knowing who you are up against, and then knowing to figure that out is going to cost you $2 million -- >> that sounds like a legal strategy, i would win in court as opposed to making sure the proper inventor gets credit for their invention. 1981 --r around somewhere around 1981 we forgot about the original inventor getting credit. this is a cold war strategy

where we are trying to go through millions of patents, most of which are indecipherable , and trying to figure out where they actually attached a real business and real revenue. trying to figure this thing out has been a puzzle, which in the complexity of it, has made the troll business the way to harvest value. >> last question. is there any hope for this and come back? >> appellee. the supreme court has said if congress isn't going to take the steps necessary to move forward, they are going to start acting. the supreme court has a number of cases in front of it, most notably, the two decided in april that say if you throw allegation and it turns out to be frivolous, you are on the hook to pay for it. that is a big piece of reform, because now the troll model has its first week shot against its achilles' heel. and that's coming from the supreme court. know why they had the

construct. up, has pinterest been lost in translation? they have a problem attracting international users. that's next on bloomberg west. ♪

>> welcome back to bloomberg west, i'm cory johnson. pinterest is valued at $5 billion, and has had no problem attracting investors and users in the u.s.. it may be getting lost in translation when it comes to attracting international users. sarah, you have a really interesting story about the troubles this business has

getting international. >> i think what we need to keep in mind is that pinterest is such a cultural thing. people share things that are artsy and creative, and if you go on the front page of interest in the u.s., you will see ideas for wedding hair were pretty , or burger recipe. those are things that don't necessarily translate abroad. to do iserest needs figure out the nuances of each culture, put people on the ground, and figure out how to tailor -- have content that is relative to those viewers. invest, theye imagine they are only in the u.s., soon it will be everywhere. what are they doing to grow international users if it is not translate well?

>> translation is the easy part. they are in 31 differently which is now. the hard part is to get relative content on the platform. a person who loves cooking in japan can look and say these are great ideas i can use, i want to contribute to this community. >> how they do that? >> one of the guys that is heading up this effort is going house to house, talking to people on these research trips how much right to figure out what makes them tick. he has been hosting these events , bringing crafty and creative people together to try and get them to talk about using the site, to organize their thoughts and desires. investors see pinterest as this really attractive property because people use it to say what their hopes and aspirations are. i want to travel here, i want to buy the stress, i want to cook this thing. that is great for advertisers,

because what is more actionable than that? >> i did a story about a young company called linkedin, and they said we are big in turkey. we are big in turkey because we got one very connected user there. that person connected to all the people they work with, and suddenly they are exploding in turkey. it was a network effect. it didn't require them introducing it, it just required it to sort of plant the seed. it's ugly pinterest doesn't have that. get thatre trying to by talking to influential bloggers, going to people who have the most important travel blog in france, the most important cooking blog in the u k, and convincing them to share what you think on pinterest. so all the people who follow you will start using pinterest as well. >> pinterest is just turned on revenues by having promoted pins, it's a pretty crucial time for them to be growing. >> extremely crucial.

they are only 30% outside the u.s., the vast majority of users are inside. most twitter users are outside the u.s.. 10 -- pin.t to we will focus on one number that tells us a lot. >> you might like this one. 10, as in $10, as in the potential cost to get into the new star wars film. let me explain. there's a contest taking place, disney, lucasfilm, and jj abrams -- they are trying to raise the number -- some money for unicef. are inviting they people to contribute $10, and with that $10, you can get invited to set potentially, and potentially be in the new film. kicked in 30 we

bucks between you, me, and emily -- who knows what could potentially happen with the new star wars film? >> really? while -- wow. >> we could see a little cory just cut -- chest. >> does this mean i'll know what chewbacca is saying? emily has always wanted me to be sealed in carbonite, they could happen there. >> that's why they're doing this. >> how wonderful of them to do this, to give back will they're making this movie. >> it will be so much hype, they might as well bring some cash for charity too. >> thanks for the disturbing image. you can get the top headlines on bloomberg radio, and at bloomberg.com/technology.

we will see one tuesday, have a great holiday weekend. ♪ . .

>> from bloomberg world headquarters, this is "bottom line" with a mainstream perspective eared vladimir putin said russia will express the ukraine presidential vote and work with the new leader. sales of new homes increased by the most in six months. created byeffects the world declining salmon population. to our viewers here in the united states and those joining us from around the world, welcome. we have full coverage of the stocks and