>> live from pier three in san francisco, welcome to "bloomberg west" where we cover innovation, technology, and the future of business. i am cory johnson in for emily chang. developersng off to in day two of its worldwide developer conference. new cellnews on its phone platform, home kit and health kit. they're also featuring components going up against competitors like dropbox.

most of google is shut down in china ahead of a sensitive anniversary. there is the 25th anniversary of the crackdown of students in the andaman square. they have checked extensively and there are no technical problems on inside. new fusiong off a lightweight car. sedansult is a midsized of the fuel just an see of a small car. it is made with aluminum, magnesium, and carbon fiber. no word on when it will hit the market. to our lead story. many apple users go outside the apple ecosystem to edit files. apple is hoping to change all that and take aim at competitors. editing a photo feature, a new calling feature like microsoft's skype, and it

features the take on dropbox. they are trying to make it easier for developers to develop on their platform introducing the swift program language. ofy are making a big portion health and home arenas. what is that mean for other companies? we are talking to john, creator of newco and a longtime apple follower. you have watched this company forever. what are your thoughts on this particular wwdc? >> i thought that apple failed to be apple. it succeeded at being the apple we all knew before expectations that apple had change the world every time they had one. >> this use to be a conference for the tiny community in the world of commuting that was david against goliath. >> everyone got super excited

when they changed an sdk for their photo app. exciting because you could do new things. now everyone expects apple to unveil a world-changing thing every time they hit the stage. this felt more like the ones of old where they were fixing a lot of things they should have fixed, addressing opportunities that people felt they had not addressed and taking on competitors who might have been more nimble in the last years. >> i remember when you're writing an system six was this disaster when the macintosh as he was there. was there. se the notion of instagram has to exist at all suggest that microsoft did not get their photo stuff quite right. messaging issues have been a problem. made big newsthat were things that apple really needed to address. they can't watch a competitor like dropbox runaway.

they can watch google come up to the side and have google drive that works better than their icloud solution. musicertainly can't lose and photo. >> they may have lost music already. >> we will see. >> streaming kind of ran away with it. this to me felt like an apple conference of old, where a lot of people got super excited, but i think people who are not techies are scratching their head and asking what is the big deal? >> you think there is something about apple? i was struck by the cloud. i remember it back to the failures of mobile me, but icloud, of .mac. there were so many cloud failures that it is hard for me to take seriously that they will fix it now. big "let'sthere is a wait and see" because apple has not been good at consumer software. it redefined that back in the early itunes area -- era.

music wasis idea when turned into software was a big deal when apple was winning. but then all the startups in the valley and around the world started to out-innovate apple. i think they are laying a foundation, but it is a wait and see. >> is a necessary thing for a company the size, now biggest tech company in the world in terms of market cap, for them to lay groundwork in a way that they did not have to before? worse is apple sticking to their original plan? >> a bit of both. they have got to lay down groundwork and continued to be the number one place for smart developers want to develop. they also have to start recognizing that some of the things that the internet has brought us are worth embracing, that they need to open up. it is a small thing but they are allowing third-party keyboards. persnickety about

controlling things like input keyboards. now there are saying maybe there are better ways to do it. >> i wonder if -- i have been seeing a lot about your company and how you address a very different world of innovation than apple historically has done. i wonder if you see connections. >> conferences tend to be vertical. this is a tech conference. it is about one vertical segment. what we realized in the conference new co. that we do is that technology is horizontal and it is affecting all businesses. all these kinds of new be new technology businesses. apple realizes its market is broadening and they need to be in all different areas and not just have this wow, tech thing that comes out. >> even when apple has been at its most screwed up, john scully was its ceo and that was not the worst. >> one could argue.

focused onas so getting pcs into businesses instead of letting it grow in education and places where they were doing well. >> now it is not pcs, but the internet probably. we are seeing innovation across industries in the internet. almost every business is an internet business even if it is not about being a startup in the internet space. apple needs to embrace that innovation and extend what they are about by being more open. >> is that is why newco is so focused on going to the companies in the different cities? >> getting inside the companies, sharing information, collaborating. that happens when people connect in small settings like inside offices instead of big ballrooms where everything is a bit overly produced. >> this may not bode well for apple, but we will see. john battelle, great to have you.

chief creative officer and founder of newco. to steale west develop millions of dollars but how did this guy stay under the radar? the future of cyber seeds next on "bloomberg west." ♪

welcome back to "bloomberg west." busted agents have hacking network that may have cost more than $100 million in losses in the u.s. the network is known as game over bot net. the network spread malware which hackers use to control files and demand a ransom from consumers. the justice department has

charged a 30 year old russian as the mastermind. he remains at large. it raises the issue, how do hackers stay under the radar for so long and what does it tell us about other hacking groups that could be hiding? david walt joins us right now. fire eye in the cyber security business. hack,und the target infamously. changed a lot in the last year? it has. >> if you look at the last couple of years, the types of attackers out there, much like the zoos take down, we are seeing sophistication from russia. a lot of the business organizations and russia -- mafia in that market are very aggressive. high-volume, low credit card type of activities. we are seeing attacks on debit cards, much like the target examples. a lot of changes happening. >> i have had the theory for the

last year that one of the reasons we see so much hacking out of eastern europe is because during the soviet union's existence, the bloc of sending the best of computers over there, the computer has to be better. michael lewis makes the case that computer time was so limited, software writers had to be good because there was very little time on computers. why do you think we see so much out of the eastern bloc? >> i think you hit on it. the talent is amazing. if you look at what is coming out of the russian market, these space -- specificity, they are very stealthy. this is different from the chinese market. it is noisy, easily discovered, with a letter finger prints on what they are. russians are very stealthy, typically. you see a 30-year-old hacker, very bright and talented. i think you hit on someone that

is important. it is hard to arrest these individuals because they are sometimes protected in these markets around the world. the indictments to the chinese military will probably not have an outcome or official arrest >> . -- >> we don't want to send guys over there will to arrest him showing badges. for your company, do you have to have different types of protection for your clients when you are looking at the risks of chinese hackers as opposed to eastern european? >> you really do. the russian market is focused for crime. a lot of four-dollar -- for- dollar type of attacks. the chinese has been for espionage. >> if i were a network administrator, how do those look different? >> is a concept called advanced persistent threat. it has evolved at the china markets because it is there for persistency over a long. of time with the idea of

stealing intellectual property. we see a different type of attack are focused in on what we call spearfishing, find an individual, get a persistent threat in place, and steal information out of it. different than the russian markets. it similar result. they are having success. very expensive. i am not one to predict that the stock price tells us. it tells more than i know or even care that it has declined a bit recently. when you look at the deal, does that help you fight things better because it is better technology or because it is a consulting business that will get you into places? >> it is three things. you hit on one of them. the people are amazing. the individuals are the best responders in the world. navy cyber seals if you will. those personnel are very unique and talented. >> very consulting like.

>> the other pieces are technology. they advance the model into automation so they can respond and the third is intelligence. that have reports been put out are very powerful and good at understanding the attackers and the combination was a hell of a deal for our shareholders. >> and yet the losses persist and get even bigger over time. the margin structure looks like it is really rough. do you feel like you have got to build the company up to be a semantic, mcafee, to handle all threats or are there specific areas that the business will focus? >> opportunity is massive in the cyberspace. toi wonder how you try figure out which problems to solve your company. >> what we are seeing is that nearly all the companies are breached. we put a company -- a report out there.

full hundred 78 companies, 900 plus breached over different countries. most of the defense architecture is not working. a new company like firei can solve these problems. it is a helen opportunity -- hell of an opportunity. if you look at the growth on the top line, 132%, feeding and raising three consecutive orders, a powerful company being built. i think we have a powerful opportunity. >> go big or home. great stuff. david dewalt, fireeye ceo. some google services like mail and calendar disrupted in china. we will find out why, next. ♪

>> welcome back to "bloomberg west." google services from gmail to google translate in china appear to be disrupted ahead of the 25th anniversary of the tiananmen square crackdown. gmail traffic was cut in half over the weekend. in a statement to "bloomberg west," google says "we have checked extensively. there are note technical problems on our side." rein,g us is shaun managing marker of chinese research group. this suggest that it is google getting shut down more, but it is our shutdown as it is. gettingyou see google shut down, it is par for the course in china and businesses and people expect it. ann you are getting to

anniversary of a politically sessile time or have the government have a political spat, google is the first company whose technical services are inaccessible in china. for the last 10 days, my company has had a lot of problems using google services. our e-mail services run on google small business and we have not been able to get access to e-mail. we have had to use other e-mail servers. >> increasingly as google is woven into the fabric of the web in things like authentication, do these sorts effortstened security start to her chinese business? >> absolutely. i think the government needs to do a rethink on some of their internet policies because you're seeing lack of internet access, instability is hurting not just foreign businesses in china but

domestic chinese companies as they go abroad. we have talked about it before. you see companies like shall meet -- xaoimi, $.10. it has eclipsed facebook as the largest social media site in indonesia. when they can't get access to google services, it really stifles their ability to become true global players and make money for chinese shareholders. >> i'm going to play a game where i oversimplify and you can call me a. let me oversimplify -- call me a moron. let me oversimplify and saying that this is the old guard thinking they can world out and this is the new guard opening up to the commerce in new ways losing the battle? >> that is one of the best questions i have heard in a long time. actually, the answer is no. >>? from me? when president she being

became president last year, they thought it would be a reformer and what you are not seeing. xi is a major reformer but is in strengthening the communist party. he has had a far-reaching crackdown on corruption which is created support among the chinese people. he has reformed political security as well as military apparatus. he is firmly in charge of the country right now in a way that i don't think we have seen since mao zedong. he is very concerned about the technical side. i don't think he will liberalize that because he is very worried, perhaps rightly so, about infiltration from the americans. there is a lot of distrust in china for the americans right now which is why you have seen a crackdown on ibm, mckinsey, the consulting firm, and other western companies that are getting too close of state

secrets of state-owned enterprise. cisco -- also seeing the ceo told me that sales of certain products in china are down significantly as a result of the revelations of the nsa and the concern that nsa has happeneding with cisco products and will hurt their sales. >> if you are an american hardware company, i would be very concerned about the next several quarters in china. in the state media, a lot of people are saying, let's buy chinese brands. let's get rid of the security threat. the government has directed the state-owned banks not to use ibm servers, while you see the chinese server companies are having soaring sales. it will be a rough time and investors need to know this for a lot of american tech companies.

i think european companies will do better over the next several weeks because the chinese government likes to take away from america and get to europe or take away from europe and give to america. a balance of power issue. managing director of the china market research group. thank you very much. fidelity looking to lead uber's latest round of funding at a massive $17 billion by tuition. you can watch us from your tablet, phone, and bloomberg.com. ♪ time for "on the markets." i am jonathan ferro. look for the stake of accuracy stocks lower by literally nothing coming off literally -- off record highs. this week it is set to get busier. a role is friday. you have a busy week ahead of you.

the price right now is actually subdued. ♪

>> you are watching "bloomberg west," where we cover innovation, technology, and the future. i am cory johnson. fidel he wants to -- fidelity funding lead uber's round at $817 billion valuation. that will give this app a higher valuation than companies like best buy and hurts. -- hertz. is that nuts? sarah joins me. uberot a valuation guy and

is a fascinating business, but that is a big number. >> it is huge. you have to look at them in context. air bnp is a startup that was raised at $10 billion in valuation. there has been more venture capital financing in the first quarter this year since 2001. we are close to bubble levels with that. i think uber wants to stake its as the ceo put it as a record-breaking valuation company. >> you said context. i think the true concept -- context is a yield curve and where people can find a true return on their investment. said, let me offer context of companies in the s&p 500 that have similar market caps, like chipotle. edison,

we're talking about businesses freehave long histories of cash flow generation and rewarding investors, even dividends, god for bid. are we in a notion were the private rounds will be bigger than a private -- a round one goes public? >> it gets into dangerous territory. can hoover be as big as those companies you just mentioned? can they be bigger? if they are getting the site wishon on the private market, can are expecting that uber make multiples on the public market. on the flipside, we talk about all the markets, we have seen a lot of tech stocks get hit this year. frothys as though this valuation in the private markets are kind of lagging the public sentiment. >> i have also said that they will not do when ipo anytime soon.

is there something going on with some of the companies that decide they do not want to be public yet? >> it is unclear, but i think that from the glamour of an ipo is not as great as the glamour of really highly valued private value mark ua -- private market valuation right now. vox is delaying their ipo. they think that right now was not the right time on the market. we have seen other private companies announce that they were raising half $1 billion monthson just a few after raising at a $45 million valuation. it is getting frothy. >> i guess we will see over time if the fidelity money is smart money, getting in at such a high price. sarah frier, thank you very much. uber far from alone in the high-value wishon club. love.h valuation

-- club. announcement by andreessen horowitz expects to increase this year. automatic payroll, health benefits, and the ceo parker joins us right now. i sort of don't care about by tuition but i am interested about when you were raising money. what did your potential investors want to know? i think what they wanted to look at was road, but more importantly it was a big valuation. we are going after a big problem . all of these companies have all these disconnected systems related to hr. as a result, there is all that paperwork and administrative hassle. what this does is it ties all of this together. it saves someone a ton of time and best of all, we do it all for free.

>> free is a great model. you can sell a lot of things if you don't charge anything. >> it is like selling candy to a seven years old. we get revenue from various providers on our system. one of the big ones is insurance companies. we act as an insurance broker for a lot of our clients and get commissions on the policies that we have. the important thing is that it does not increase their costs. >> you listing ratio for these companies? >> but we can't take over existing policies as well and service them on behalf of the client and insurance company. we do not have to write a new policy for us to make revenue. >> few things are as private as people entering into health care forms, the information you get when you see someone's payroll, their taxes, their alimony elections -- deductions, what ever. how do you deal with generating affective leads when the people who provide information don't

want the information out? >> maybe there is a misunderstanding, but we don't center information to anyone, ever. information to anyone, ever. you connect to your insurance to our system and we get paid by the insurance company. >> you're not looking at lead opportunities. ofis not like here is a list all the clients, go after them. we are presenting things to you come alike do you want a flexible spending account? >> there were notions that when byplesoft was acquired oracle, when oracle changed their business from selling databases to very differentiated from ags in software chart software -- hr software from peoplesoft. it would be integrated and

people would have these periods that they were describing. what went wrong? >> i know almost nothing about what when wrong. >> is a market opportunity. >> what i understand is mostly my experience at my last company. we were about 30 employees when i left. ordid not have anyone in hr anyone like that because we were trying to conserve capital. what we found is that there is all this administrative work that floated to the top. i ended up spending a couple of hours a month setting people up in payroll and making changes here and there. --was a couple of moun hours a month that i deeply resented. we allow these companies to focus on people instead of paperwork. >> there is great excitement in the notion of software as a service. should there be? >> gosh. i don't know much about the public markets and what is going on there, but i think that we

have a great business. we have a product that solves a really big problem. we get a generous but fair sort of revenue stream from benefit providers like insurance companies and it is recurring and continues over time. i think it is a good model for us. but my expertise is really on our business specifically. you seeder if opportunities that are available in business because you structured it that way. in particular, in terms of acquiring new comps rose -- new customers. >> hopefully with these customers, if you can offer a great service and you can keep them around for years, then you can spend a little more upfront to acquire them in the first place. >> in terms of customer series, is there a particular user interface that i think is -- that you think is useful to create over and over again? >> there is no particular we are trying to emulate. -- most of thew

way we approach problems and build products is, what were the things i hated dealing with in my last company and how what i wanted it to work there? when you hire someone, there should be a button that says "higher." you say, i want to hire john. he starts this month. go and it is done. from there, we handle everything else. employment agreements, compliance, getting them on payroll and benefits. that is the way i always wanted it to work and that is the way we built it. >> do you find that insurance companies embrace innovation more delicately than others? in san francisco we are used to tech people. thisance companies have notion of being old-fashioned and not quick to think. >> i think the heart is willing in the flesh is weak.

a lot of insurance companies are stuck in 1986. it is the age of the fax machine. nothing is online. they are very interested in making changes, and we are working with some of them to get some conductivity to their system and do things electronically instead of on paper. yeah, it is really backward in a lot of places. ceo.rker conrad, zenefits good luck on making the company even better. ford has been experimenting with lightweight materials to enhance performance and make cars more sustainable. maybe faster. imagine that. your tablet, us on phone, and at bloomberg.com. ♪

i am cory johnson. this is "bloomberg west," and yes, we are in a beautiful day in san francisco and surrounded by trains, planes, and automobiles. ford has been improving technology for 20 years. matt miller went to the world headquarters of ford to see a constant car putting lightweight to the max. ♪ >> this is the massive take-up 2013 ford entered in the so brutal,rrain is it is a victory just to finish and this vehicle that. >> we want to till -- wanted to we wanted to test the durability. we did not tell what the driver was. >> this was not an ordinary truck.

instead of a standard steel body, it was made of aluminum, making it 700 pounds lighter. the company went to extreme to prove that light can also be tough. there is a lot at stake. this is a technology that will be rolled out and the all new version of its best-selling f 150. >> it helps to make it stop quicker, accelerate faster, and the customer can use that capability to carry more and told more -- toow more. out of ourtaken way vehicles consistently for 20 years. >> until recently, the technology was focused on track projects like fort's gt40. new government standards are pushing automakers to deliver more fuel-efficient cars to the masses. >> light waiting -- l ightweighting is an essential

part to our strategy. >> enter the fusion concept car. >> is about 25% lighter weight. that is to car sizes smaller. >> is aluminum and carbon fiber. it is looking at how these can come together and create an optimal solution for weight. they cost more than steel. bringing down the cost may be difficult. >> the challenge is bringing it to mass production. we have not solved all challenges yet. this is where we see the future going. this is what we are working on now for our next generation of vehicles. >> matt miller is here with us. joining us as well is for executive -- ford executive. he is the global vice president in charge of engineering. you oversee these things. first of all, it has got to be exciting to be able to li

ghtweight these trucks for racing purposes and speed, but also increasing their fuel efficiency and making them cheaper to operate. you are really not only doing something better for speed nuts like myself, but for the country and world. >> absolutely. it is great for the environment. it is great for our customers in terms of fuel economy. great for cost of ownership. you make them lighter, you can make them for better heart -- hauling of cargo. >> if it is lighter, you can stop faster. >> we are and the business of mobility. moving a vehicle takes energy. r the vehicle, the less it takes to excel array. >> why is this happening now?

has there been a technological advance that makes it possible? >> there was all kinds of technology becoming available in terms of materials. as we have demonstrated in the going to are going to watch it next year. we have created the entire body out of aluminum. the research we did on it, we can now get really structural, really tough, strong alloys. >> that was the issue. it is fine for airplane, but not safe in a potential car. >> it was two things. it was building the ally for the strength -- alloy for the strength necessary. also having the availability of automotive-grade aluminum at the scale we needed. >> building a better truck is what gives us all of these technological advances on the f-150 side. the concept car we were looking at was the result of the department of energy contest to

forward the advancement of technology. department of energy contest that we won and we have been thrilled to work with the department of energy on this along with a partner of ours. magnais a subsidiary of that has been working with us. we have put multiple materials in this vehicle. is vehicle -- lightweighting crucial for fuel economy, but it has to perform in crashes and all the other attributes of the vehicle. to pickbeen able materials that are necessary for each one of those attributes and be able to join those materials with really advanced technology and be able to take out roughly a hundred pounds out of the car. >> which is key as an engineer. the challenges are not just getting these space-age materials, like aluminum alloys or the carbon fiber, but being able to stick them to each

other, being able to do it in a cheap way that is possible to manufacture the amount of cars -- the best selling car since the taurus -- and doing it in a cost-effective way. >> it has to be the right value for the customer. it has to provide a clear benefit to the customer. at the same time, it has to perform all the things we want it to perform. the rigidity of the body has to be right so you have the right handling experience. the crashworthiness has to be perfect. the noise vibration and attributes have to be perfect. this is a great research lab form for us to develop these technologies. >> as you engineer this stuff, at what point do you start to imagine cost and try to figure out where the cost issues will be? even as an engineer, you can't work out what it will cost in production or what it will look like when it is them. you have to make a decision early on to go down a certain path. >> we have a structured process.

we have an advanced research organization that is always doing leading-edge work on materials, sourcing, all kinds of stuff. when you take that part of the research, when it is done, when it is physical, we bring it to an organization that looks at it. how come we implement it into a vehicle? once we have a complement -- concept ready, during that phase, we try to make sure it is affordable for our vehicles and it is the right material, for the right rise, for the right car. seemese kind of projects to help you push price down. you are working with dow jones to make cheaper carbon fiber. you're working with samsung to make lithium-ion batteries that are light and have more bad -- energy. price. lower the

partnersthese supply in was good. theming them and having integrated in is good and having them scale is important. if you're going to build 5000 of them, you will not get the scale to lower the cost. but if we produce hundred's of thousands, it will be fine. we make 700,000 pickup trucks a year. >> that is a lot. >> we will look out for those as well. >> do look out. if you get hit by one, it hurts. matt miller, great to have you here. vice president of project development. "bloomberg west will be right back. ♪

>> welcome back. i am cory johnson. this is "bloomberg west," and it is time for the bwest byte. we don't wear ties outta here. >> i noticed that. i went to a press conference today. out of 30 people, i was the only person wearing a tie. the byte is 17. >> the number higher than 60. >> the new mega earth is 17 times the mass of this earth. it is about 560 but not free cae know. matt miller, thank you for being here. you can get the latest headlines

at bloomberg.com and bloomberg radio as well. we will see you tomorrow on "bloomberg west." ♪

>> welcome to "money clip." we have the video and business news. i'm adam johnson. here is the rundown good edward snowden's worst nightmare. we talk about the guardians of u.s. gathered to talk about cyber protection. and for the college gm, and chrysler. sales look pretty good. the rules of the air, the