>> live from pier three in san francisco welcome to "bloomberg west" where we cover innovation, technology, and the future of business. i'm emily chang. apple senior vice president says this is product pipeline is the best he's ever seen. he did not elaborate at the code conference but under pressure to deliver its next lackluster product, announcing a product yes -- announcing buying beats yesterday with cofounders jimmy eileen -- iovine and dr. dre.

informationving after 700,000 miles of autonomous driving for the self driving cars to use algorithms for road hazards like pedestrians or when another car will change lanes. google said they would build prototype cars with testing starting this summer. a new report says hackers and iran created an elaborate game using facebook and other sites to spy on u.s. officials. they created a fake news organization and attempted to interact with some 2000 officials to access their data. report says u.s. lawmakers, defense contractors, and a four-star general were among those targeted. it's unclear if their government was behind it. first, to the lead story of the day, apple makes a bold statement about the product pipeline with senior vice president eddie cue proclaiming

great things to come. here he is speaking with beats cofounder jimmy iovine at the code conference. >> later this year, we have the best product pipeline that i've seen at apple in my 25 years. pipelinest product you've seen in 25 years? including the iphone? i get to see it tomorrow. i've been out here for two months. i'm not kidding. >> that's a really strong statement you made, you think for the rest of this year you have the best product pipeline you've seen in 25 years. imac,years, you did the the ipod, the iphone, the ipad, the macbook air. asy are widely recognized pretty good products. >> i agree with you.

i certainly believe the products we have coming are great. hours appearance was just after apple struck a deal to buy beat electronics for $3 billion. tim cook posted a photo of him sharing a laugh with iovine and dr. dre. brad stone and cory johnson as well as the ceo of mine at digital media ventures, i started by asking if it could really be bigger than the ipod, the iphone, and the ipad. take a listen. is famous forpple their spin and the reality distortion field. we will believe it when we see it. >> could you just see the eyes roll? despite the spin, it comes from a position. not of strength but of weakness.

music is core to the apple franchise. over the past couple of years, the hot services and music are pandora, spotify, youtube. apple has squandered that franchise. they get the credibility of its founders and they get the hardware and the beats music subscription service. >> music is what brought apple back. the ipod is what brought apple back. the ipod on windows is when the growth accelerated on apple. this really does show apple trying to fix a problem they have with their old business, not developing new business. the comments about the product pipeline, what will they come up with next? what could be anywhere near an ipod or an imac, the first steve jobs returned product. the imac, the ipod, the iphone, what could possibly be close to that? it's hard to imagine. we've talked to a lot of

analysts talking about services, cloud services, the way they clearly screwed that up. of people out lot there criticizing this beats deal. they don't think it's very innovative. >> they think it's expensive. beats has an android out. limiting this very orthodoxy of developing just for ios. allowing beats to exist as a separate round allows them to build an independent service that's basically following consumers and how they are using devices. >> peter, lots of skepticism here. do you agree? >> it easy to be skeptical. there's no question they are doing a deal due to downloads going down and the rise of automatic streaming but let's not forget that beats today is billion in$1.5 revenue. this came down with 2.6 billion

dollars in cash. when you look at the business in isolation, that alone is a good business. a's easy to reject but it's good, strong business. let's not forget about the fact that with beats, they are getting an established brand that has a cool factor these days with the kids. i don't think we should minimize that. it's really important in this world of on demand streaming. overall economics from the streaming services, with the with jimmy and dr. dre coming into the fold, that's being artist friendly and civilizing to the community -- and signaling to the artist community that they matter. >> i agree with all of that, sort of. one point $2 billion in revenue, what do you think the margins are on those headphones? 10%? >> i think the margins are actually pretty good. he eats is also getting into the

automobile market. when you look at the deal, it's expanding apple's brand into wearables. i'm not necessarily justifying the price, but i think there is deadreal logic find it easy to overlook. there is item after item for why it does make sense for apple. >> you can see onstage the difference between eddie cue and jimmy iovine. much larger than life, very outspoken, not your typical buttoned up apple executives. >> i think apple needed an ambassador to the creative community. content is about selling hardware. apple tv, the ipod touch. you need the content. apple has had a limited orthodoxy. download-centric

model. i think jimmy and dr. dre bring back to apple with a lot of credibility with media companies and artists. >> you don't think there will be a culture clash? keeps making those videos, there might be. go ahead, peter. >> they're culturally less the similar than you think. steve jobs was very much considered an artist by money. aey just approach art in different kind of way. you have the artistry that comes with technology. i think this is a really exciting deal to signify this convergence of technology meeting great content and driving great technology. >> i want to make one other point. this is seminal for apple in another way. the biggest deal before this was when they bought next and i was not only the biggest deal but apple was proud of that. they would never do a deal

bigger than the next. folks would say that. it marks a departure from the old orthodoxy and it shows they are now willing to take bets to complement its product and services where it's a week. >> they generated this in the time from the news it was leaked onto the was announced. the catch creation at apple is so massive this is a bump on the log. >> cory johnson, brad stuarone, manatt.r csathy from we will hear from two of the people in charge of the google self driving cars next. ♪

"bloombergback to west." i'm emily chang. google is moving full speed on the self driving cars project. they will build more than 100 prototypes complete with no breaks, no steering wheel, no gas pedal. testing will begin later this summer. the director of the self driving car project and director of were onor the project with charlie rose to talk about the challenge of getting these cars on the road. take a listen. >> we've had our vehicles on the road and we've done about 700,000 miles of the cars driving themselves and we've gathered that data and now we can use that data to have the algorithms learn. what is a personal look like when they are about to change a lane.

the human brain does this constantly on this is but they have to do. >> we know that the long road and artificial intelligence. how does it distinguish what might be person versus an animal? >> that's great. we look at the shape of the object. we look at how it's moving. there's a lot of these very complicated what we call feature vectors that are engineers designed. then we throw a whole bunch of data at this machine learning algorithm. it looks at this collection of features means this is a person, that's a tree. >> monitor wrong, what does it do? collectively have to be robust when it's wrong. it will be conservative. we program it to really be a defensive driver. it's a leaving extra space places. all of these kinds of things to allow it to have a margin where it might slightly misclassified things. >> what worries you most? your concern has been safety.

>> for me, making sure we do everything we can to do the testing necessary to proved ourselves that it's safe. just making sure adequate , google hasone already tested 700,000 miles and we're using that to simulate scenarios and out to the database. we are in a strong position to make sure that we have it right. >> sebastian has been on this program a number of times and he formerly headed up this operation. he said an interesting thing. put too much intelligence in a car and it becomes creative. i assume that means too much information inside begins to take chances? >> i'm not sure exactly what he meant i that. we do use a lot of machine we do thatut off-line. then we have this really amazing

system that allows you to go in review where the car has driven in the past, how it reacted, how with the things we've learned. we can predict a lot of the behavior of the vehicle. it needs to be generalized because he will not see the same cyclist in the same place every time but you get enough confidence it will behave the way you want it to. >> airey jaffe wrote that right now i cannot detect a driver trying to waves and elaine, for instance someone requesting a merge and cannot understand universal language of urban traffic on king. >> that's fair. what's interesting, and this is one of the things we learned early in the project, but there is a lot of a mess around this. you have to be able to see one another, make eye contact. it turns out that you can send message with how you position the vehicle. went to start moving forward, it signals around you that you are

going to go. we have been thinking about how you do that in a safe way that allows other people to get that the car is moving. >> how important is what google has done for mapping in this process? >> i think it's vital and distinguishes what it's doing from all the other companies. this map allows the company to know exactly where it is in the world at all times and know what to expect as it knows what's on that map really helps it figure out a lot of the difficult issues in the environment that it's operating in. >> it has to be far more precise than what google maps does today. >> the features, the geometry, the detailer necessary to know all the things were looking for to drive safely on the roads. ford and chris urmstron.

compromised by an iranian hacking network, we look at a cyber espionage campaign when we return. ♪

>> welcome back to "bloomberg west." i'm emily chang. how can tweak to become fodder for cyber attack? they have been stocking

strategic targets for the last three years using social media platforms like facebook and linkedin. they created a fake organization, newsonair.org, in created fake journalists. cory johnson is back with me. joining us from washington, d c, michael riley who wrote up the story. michael, how did they do it? how do we know they are from iran? terms of how they did it, it's a pretty clever operation. of a virtual media organization in created a bunch of journalistic personalities online to go along with it. they would fill the webpage of this media organization every day with articles they affectively lifted from places like reuters and other mainstream media organizations put under the name of the six journalists and then they would have these corps of journalists

use their persona to get close to targets, lawmakers, defense , and others. until they got to the time they trusted them enough to clicked would download malicious software, steal credentials, get access to e-mail. it's a pretty clever operation. >> we know they are from iran because they worked based on the iranian work schedule? there were certain clues that led eyesight to believe that these were iranian hackers? >> is out of evidence that points back to iran. are based inses iran. they used iranian words as passwords, the hackers. if you charted the activity of the hackers, it's it precisely with a typical iranian work week, even to the weekend where they took off starting thursday afternoon and started again on

saturday. >> i love the detail of the organization, the iranian week and is exactly what mossad would have us do? it becomes circles within circles. you can always make it look like somebody else. that's do it in ways really hard to detect. in this case, a lot of the targets were israel he and israeli officials. israeli. it looks like from all of the other targets that the report does point out that on some level, this has to be hypothetical. you can never get to the point are you tell who was up the keyboard. this book was written about a covert agent and this exact same technique is used in this book, his novel, about using social media.

the weak link in the spy network? >> one thing this campaign shows is if you have enough resources, patience, and time, the vulnerabilities created by social media are pretty large. it gave themonas, a lot of interesting back stories. they created an owner for this news organization, or an list interacted with the owner, and then they began to friend people around the targets. over time, it created a sort of a trust where it made it easier to get people who would otherwise be trained not to cook on these links. if you get a video from someone you have been interacting with months or maybe longer, that's a hard thing to avoid. >> quickly, michael, you say this indicates that perhaps the iranians and the iranian government may be escalating

their hacking efforts to the level of china, putting that many resources behind it. >> they're really trying to play on some level with the big boys. u.s., china, and rush up with a lot of money and effort into this. iran has been trying to up its game a cyber espionage and doing more destructive attacks. this is the biggest piece of evidence we have so far that they are actually getting close to doing the kinds of large-scale campaigns than some of the larger countries do. >> michael riley a bloomberg news, thank you so much. the sale of the l.a. clippers but aretch $2 billion, they worth it? we ask the owner of the clippers biggest rival next on "bloomberg west." ♪ time now for bloomberg television's "on the markets."

i matt miller. five days of gains in the last six. closing near session highs. the s&p 500 at 1920. over half aup percent. ♪

>> you are watching "bloomberg west" where we cover innovation future of business. is so of the clippers gathering attention of many but with a price tag that could swell to $2 billion, what would owners have to do to see a return on investment? senior west coast correspondent jon erlichman has more from l.a. >> it's pretty amazing. this clippers story has put valuations aren't and center. the golden state warriors are building a state-of-the-art

facility is another reminder of how big this is. art of mandalay entertainment group art of the group that acquired the warriors for than a record $450 million and they say it's worth a lot more now. peter, good to see you on "bloomberg west." project likeo a building this facility? what are some of the challenges? ofa lot of gold, a lot drama, a lot of cement, a lot of planning. arduous,ys a long, somewhat uncertain journey. you try to create certainty by doing it correctly, engaging with the community, the architects, the people financing it. there are a lot of constituencies. it's like having 12 jugglers landing on 12 jugglers perfectly. it's difficult. >> speaking of the community, there is obviously a large tech community and you talked about welding the madison square garden of the west and you want this to be a very tech savvy

phil is -- facility. have you spoken companies like apple or google in ways that their technology could be integrated to the facility? >> we have to have a clicked and mortar strategy. we have to create a venue and a platform that allows people to interact and participate in the experience of the game, the arena, the site. their participation is what generates of their enthusiasm and ultimately the money. people inng to silicon valley and san francisco who are the leaders in this market and really know how to andge audiences, interact create that environment would be insane. we will draw upon that heavily and we have been drawing upon that heavily. >> and the los angeles clippers story has raised questions about team value and valuations. there could be offers on the table north of $2 billion.

do you think the clippers are worth $2 billion? >> i think they are worth what people are willing to pay for it . the people bidding are all extremely successful, extremely smart and did not get there by accident. they will measure value and what they think they can add to it. the valuation of the event and spectacular. it is something you cannot remediate easily. you have to be of it and with it. part.ives a very vital we owned the clark, baseball teams, minor league teams. we know that live entertainment is critical. when you have a team like the clippers are the golden state warriors that has a great and robust audience, they are very valuable. >> what about the talent? it makes the argument that salaries can go up whether it is

players or coaches. five years, 25 million dollars, how do you measure success on these contracts? at a time. on the floor, in the hearts and minds of your fans, and the venues. you have to create that mobilization. it's not just one thing. you have a great script of bad actors, you will have a flop movie. if you have a bad script and great actors, it will be a bad movie. it's the confluence of design and execution. getting the best talent is crucial to that. you have to make them not a collection of players and coaches but a team. that alchemy is magic. >> you talk about not being able to use the dvr. sports content is king. it does raise questions about distribution. as part owner of the dodgers, we saw them team up -- as part of the group that owns the dodgers,

we saw them team up with time warner cable to create a channel where the games can live. then there were pay-tv providers who balked at the fees to carry that channel. do you expect a resolution to that soon? hopefullying ends and well. the idea is to recognize we made a sale to the company and it was their job to get distribution. they made an arms length deal. it's very important to the fans that they get their assets, the dodgers. that's the part of the story they got wrong. we sold that asset to a provider who then does distribution. as you heard, time warner cable is being purchased by comcast. at least that's in the works. do you think that purchase may speed things along? >> there's a lot of amalgamation

going on. you have time warner cable, directv, at&t. there's a lot going on and it will change the paradigm on all of this. i think the people who want to get the sports teams in any city, dodgers and los angeles, will get them. >> you are a big sports guy but --cannot let you go about without talking about movies. it's a summer box office season. what happens here in the u.s. is important. about that. >> it's a simple metaatter if of numbers. where would you aim if you wanted a 5% increase? not market is expanding, fully mature. but happens is they make products that is going in the for and urine for in the

international market. it consumed the market successfully. to one.ces two in three when you are deciding to make a picture, you look at the international market and what it can yield from the picture. they cannot compete with local repertoire. the most recent spiderman was over $300 million. openingalf $1 billion on friday night around the world. where are you aiming -- international. that's always great insight, peter. peter guber, ceo of mandalay entertainment group. >> how do you build the boots that carry the hikers over the toughest trails? on youratch a streaming phone, tablet, bloomberg.com, apple tv, and amazon fire tv. ♪

>> i'm emily chang in this is "bloomberg west." this week, a special look at how technology is changing the way that we experience the great outdoors. uncomfortable hiking boots can make a short walk feel like a long one. how does footwear brands use tech to build boots for explorers tack -- tackling the toughest terrain? cory johnson is in the newsroom with more. >> they've been a big name in boot since the 1980's. technology and smart design has allowed the company to make its footwear mark with shoes geared toward what these guys are after. president joins me now, gene mccarthy, from new york.

talk to me about the ways that you invent shoes were hiking boots differently than you did a using newback technology. >> there are two different types of technology. had you get from point a to point b? you've had guests talked about that. we're obsessed what happens between point a and point b. we don't want technology to plan to it. the mystery needs to remain. we think it's the discovery of yourself and if there is a way that the technology can play in, how do you share your social experience so that you can tell people what you did and see if others want to join you? then there's tech knowledge he we have in our products, two. >> talked to me about the latter in the way that you incorporate technology. we think about electrons moving. we think about sensors in shoes like nike has tried and someone.

>> i think the greatest technology is the human body. no one's been able to replicate or duplicated in forever. our job is to complement that. our notion is to make them absence of sensation. we are only trying to solve for a couple of things. we want you to be temperate, warm or cool. we want you to be dry. we went to help protect you from certain elements whether it is rocks, crevices, twigs. ofwanted to be absent sensation so that our product are there to complement you. there are plenty of technologies in there but it really is to complement the human body. >> has the development changed? are there ways you use this to get different types of technology from your users? very elaborate way of testing our products. there is two types of feedback you want, very scientific and then the very emotional. psycho-technical

where people put on the products and transform themselves to feel a certain way but how they feel can enhance and improve their performance. it is scientific and emotional. >> you were referencing tech elegy suggesting the way that some people experience the technology suggests that it took away from the experience of what happens on a great hike, ride, or run. likes i wonder if it's a contradiction with the great outdoors now. a two-year-old right now can navigate in scroll through a smartphone, clicked on an app, watch a video, pause, start, stop. in 10 years, we are worried -- are we going to blur the lines between reality and virtual? you've seen so many videos of the grand canyons, the cascades, the alps, do you think you have actually visited them? we are driving the ideas that the outdoors in person and for real with the dirt under your fingernails is the way to go in technology should just a

something that enhances it. a great piece in "the new york times" that technology lets us know something about everything when we probably know next to nothing. it sounds like you are saying the same thing. >> we need to get self-aware again. useless unlessis you are self-aware. the one thing about technology, again, how can it complement you instead of being your life? how can you use it to enhance? for example, i believe in 10 be veryat there will individualized, personalized technology for each and every one of us on this planet. boots, garments, and other things will almost be the accessory as opposed to now where we are trying to cram the technology into the product. >> are you trying to architect your geared towards more individualized stuff with more specialization around it?

maybe smaller production runs as a result? >> that's where we are heading. it's hard to do when the manufacturing process is still 20th century. every individual on this planet will be their own brand and it will be on us and other brands to go out there and make sure we are personalizing for you. >> you have inspired me. i will dust off my merrill's. have served me well. google says it's not where it needs to be when it comes to workplace diversity. we talked to a group that wants to offer a solution and is offering a solution. watch a streaming on your tablet, phone, bloomberg.com, apple tv, amazon fire tv. ♪

>> welcome back to bloomberg west." i'm emily chang. google is turning the spotlight on itself when it comes to diversity. they broke down what the workforce looks like. 70% men, 30% women. 30% asian, three percent hispanic, 2% black. they said the decision to go public with the numbers was "we are not where we want to be when it comes to diversity and we want to recruit a more diverse workforce." cory johnson is with us and the manager for events and out reject code 2040 working to create awareness and opportunity for top minority engineering talent in the techniology

field. , stu these numbers surprise you? -- how much do these numbers surprise you? black nine percent is or latino. >> i google it's even lower. clanks aguila kept the industry and as more companies follow suit and revealed their numbers, i think we will be able to see that this is a trend that cannot be pinpointed to one particular company. it's industrywide. at code 2040 we are looking to give access to more students to bump that up so that students can get into the top tech jobs. >> you have placed students at companies as big as facebook, foursquare, up and coming startups as well. >> google is willing to put the

stats out there especially when they don't look great. >> i remember when i did a story on code 2040 was only intel that gave us access to any numbers like this. >> what's it like i google that they are willing to sort of come out with this? >> i cannot speak to what it's like out there now but they are doing this because they know that there's a problem. u.s., they of the need to look at who will be the majority. they need help, clearly. they are looking to start a conversation that we have been a part of for a while. >> one or some concrete things that companies like google who want to bring in more diverse talent, everyone seems starved for engineering talent in general, where should they be looking? >> the top 10 cs programs. they go do a historically black college or university but they

should be looking there also for where the top talent is it they want more black employees. >> as the straight white guy sitting here, i wonder how google's products might benefit for having a more diverse set of creators. >> indefinitely. when you look at who you want to buy or use your product, you have to look out at the statistics. if a product can be bought by black, latino, women, half the population, you have to have people building that who can bring the perspective to the product. >> what is it like for a student on the other side? how hard is it for them to get their foot in the door at these companies given that there seems to be a lot of open engineer jobs? is acess and resources huge issue. students are being told that you should have a really great linkedin account and they need some guidance in that. we will be rolling out a program in the fall to reach 3000

students to help them get past the door, get in the door. blacke of the historical schools, have they done much in terms of job placement in silicon valley, come here and said, i know you are looking at ivy league but maybe you should be looking here? >> this is the second year they did a leadership conference in technology which was hosted at a big tech company. they are speaking up and saying you need to help us. we can help you. >> are there any companies doing this well? >> not one i can think of off the top of my head. job owned has been with us from the very beginning. -- jawbone has been with us. >> it smart. they cannot find places where they are looking for it. you would think to look for it somewhere else. >> you are right.

code 2040 is looking at that solution. we will go out there and do the searching, the setting, making sure we are bringing you the latest talent. >> one of the latest numbers in terms of people you've placed? >> 23 so far and 23 possibly more. we start on june 14 so we will have about 45 total. >> really interesting. this is a big deal and it will get worse when you have more depth in terms of ability in the valley. >> a fantastic organization and its been amazing to watch you guys grow over the last few years and see the growing crop of interns every summer. congratulations for that. 2040.ardner, code time now for the bwest byte, one number that tells a whole lot. the day.the bite of >> 11, how many days it would take apple in terms of revenue to pay for the beats

acquisition. 11 days worth of sales to earn $3 billion in revenue, what they spent. >> are you trying to point out it's not that much money? >> it's just the blink of an eye. >> do you agree, jon? >> they can do what they want. they will see with the culture fit is like here. it's true. i have enough money to do all sorts of fun stuff. >> you are pointing out earlier e's history isin interesting and what he really brings to apple. tell us more about that. >> he cares a lot about sound, the sound experience. apple cares about sound. in the marketing department, look for some interesting stuff from them in the months to come. johnson,lichman, cory thank you. thank you all for watching this edition of "bloomberg west." get all the latest headlines on the top of the hour on your phone, tablet, and

bloomberg.com. we'll see you later. ♪

>> welcome to "money clip." we tie together the best stories, interviews, and video in business news. around the world, not just china. an iranian network tried to hack u.s. lawmakers for three years. uncle sam wants you to join the cyber command. edward snowden says he was serving his country. he speaks in nation. in company, a brooklyn tailor lets out the waistline. google threat, self driving cars are freaking out detroit. we will kick it off with what everyone is talking about.