>> live from pier three in san francisco, welcome to bloomberg west, where we cover innovation, technology, and the future of business. i'm emily west. -- i'm emily chang. we are heading inside johnson & johnson. hosting early-stage startups, hoping to find the next big thing in health care. we will talk about how technology is changing their business. the company planning to stream

concerts live on yahoo! starts tonight with the dave matthews band. we will get an update on how the marissa mayer turnaround is going when the company reports earnings today. major job cuts coming at microsoft. the tech giant is planning its biggest round of layoffs in five years. people with inside knowledge say the cuts are likely coming in the nokia unit as well as in marketing. of innovation, johnson & johnson may not be the first name that comes to mind, but these days, the pharmaceutical giant is taking a page from the tech industry. like other big pharma companies, j&j used to develop drugs the old-fashioned way, internally. today the company is collaborating with outside startups, inviting them into their incubator lab in la jolla, california. as part of our special daylong

coverage inside johnson & johnson, bloomberg sent carol massar to get an inside look at the company's innovation lab. take a look. >> could billion-dollar drugs come out of this process? >> we are indoubt. the incubator in la jolla, california. entrepreneurs are looking at everything. >> we're trying to come up with new molecules to treat diseases in a brand-new way. >> they are renting out lab , grantinghe incubator access to millions of dollars of equipment that startups usually can't afford. >> there are no strings attached. >> there are no strings attached. >> to me it was essential that this was a no strings attached model. otherwise, they would not come. >> mayor coming.

or hundred companies have applied for space in the incubator since -- 400 companies have applied for space and incubator since 2012. >> why are you doing this? >> because the traditional business model does not work anymore. >> it became clear that the old model did not work anymore, especially after j&j lost billions as a result of patent expiration. the company realized it needed additional forces for development. today, j&j aggressively scans the globe for ideas and projects. now more than half of the drug development pipeline comes from outside the company, compared to more than 20% a decade ago. there could be more. j&j has hosted close to 200 .rojects last year >> what we're doing at wellspring is sort of the mount everest of cancer drug

discovery. >> troy wilson, an ambitious serial entrepreneurs spent a year at the j&j incubator before moving out. he decided to work with j&j to develop a drug to treat a rare form of cancer. >> the reason we went with j&j is this is a big, hard problem. >> the chief scientific officer is counting on wilson and other startups to help solve the big, hard problems. and if j&j gets to make money in the process, all the better. >> what is a success for you? >> at your. >> do you think that's what will happen? >> that's what will happen. >> carol massar joins me now. i know you have a very special guest. >> i do indeed, emily, thank you so much. i am here with alex gorski, the chairman and ceo of johnson &

johnson. thank you for inviting me into your headquarters. >> it is great having you here. >> we have to talk about earnings. you beat both the top and bottom lines but stock is down. i think there is some expectation that you could have pasted it higher because you had such a great quarter. >> first of all, we're really proud of our performance. when you look at the fundamentals, whether it is pharmaceuticals, consumer business, medical devices, we are doing a lot of great things and helping patients live longer, happier, healthier lives. it is always difficult to predict how wall street is going to respond. >> are you being a little conservative? >> number one, we want to do what is best for patients. number two, we can't predict how the markets are going to respond, but we know for a stay focused on the long-term and on our key strategy -- if we stay keysed in the long-term and

strategies, we are going to come out ahead. >> are you hiring? ? i describe myself as a realistic optimist. when i look around, we have seen a continued lag in demand around health care. unlike past recoveries where elasticity, to be this year we are seeing much slower returns if you look at hospital admissions, patient procedures, primary care physician visits. they are slower coming back. if you look at all the other major drivers, demographics, aging populations, emerging markets, the affordable care act, we know over the long term there is going to be significant demand and that is probably the biggest challenge we are facing. growth from a

year ago. 11% in the first quarter. can you sustained that kind of -- sustain that kind of growth? >> if you look back over the last several years, the way they have been able to focus, introduced new therapies, things -- thingstate cancer in prostate cancer that are fundamentally changing and helping people live longer lives. all of our teams have done a great job, whether it is new compounds entering the field, but we think that overall, when we look what we are doing, we are going. . -- going full hog. >> you're very aggressive. help patients and add value, that is where we make a difference. >> sustainable, 21%, that is a big jump. >> we want to stay focused on

helping patients and innovative science going forward. we know we can be very successful. >> 21%? >> well. >> 11%? grow fastere can and help even more patients. >> we are going to take a break. we have been talking with the chairman and ceo of johnson & johnson. you're watching bloomberg west. ♪

>> welcome back to bloomberg west on bloomberg television. i am here with alex gorski, the chairman and ceo of johnson & johnson. so, you have three major businesses, what do you want to do? let's talk about the consumer area. problems. a lot of you guys have made some big steps to improve that. where are you in terms of dealing with the recall? >> we are very committed to our

consumer segment. consumers play such an important role. >> the face of j&j. >> absolutely. about band-aids, baby shampoo, baby powder. it's hard not to think of those a big about johnson & johnson. to tell you, i am really pleased with the tremendous progress we have made in the past several years in that division. you got a chance to talk to sandy and to go to our labs. one of our top priorities was to remediate our entire product. we are meeting all of our commitments. we are getting products back on the shelves. today from where you were in 2009-20 10 when they had the massive recalls? >> i think it is. we have gotten a lot more standardized, even more centralized in some areas where we find common processes, common

checks. i think we're really seeing the results of a hard-working effort. most important like, when we are getting product back on the shelf, we are really seeing mothers and fathers just in this quarter alone. growth.as 16% have made a tremendous amount of progress. >> where are you with consumer roddick's? >> we continue to make progress. -- consumer products? >> we continue to make progress. we are not giving an exact number. we are focusing on fundamentals first. we have those in place now, which you're going to see a redneck's 12-18 months. expensive -- which you are going to see in the next

12-18 months. >> how expensive is it? >> if we did not have the diverse portfolio we have, we would not have been able to invest in pharmaceuticals the way we did five years ago when our consumers were thriving. now pharmaceuticals are thriving and we invest in consumers. >> you are diversified and i know that is an important part of the strategy. areng said that, there folks who own j&j who say maybe they should sell the consumer business and just keep the pharmaceutical business because the growth is doing so well. >> we believe in a diversified model. we believe it helps us manage in the long-term. a lot of power and a .ot of balance

we have a aaa credit rating. >> you like that. >> by having unique insights around things such as hemostats, around things like pharmaceutical, we have a transformational new way to control bleeding. it gives us a great advantage commercially. we are seeing more health care. because of the breadth, depth, scale on our sides, only we can really do that. >> you have a lot of businesses. any smaller businesses, potentially? >> absolutely. several years ago, we announced we were going to be very decisive about where and when we were going to be. we set number one, we wanted to make sure we were number one or number two in the market to be able to really make a difference. or we wanted to have a clear

path to be competitive. we said if we couldn't do that or the business was an complementary to another business, we would think about divesting. if you look at the decisions we particular brands, i think it demonstrates we are being really disciplined and decisive about where we are and where we need to make investments. >> i have to ask you about tax inversions. is that something you talk about in terms of strategy? of course taxes are something you pay attention to. for us, it's what is the right ?trategy how does it help us help patients and consumers over the long term? what does it do for us financially? you don't see tax and version is the major driver.

>> does that mean you don't discuss it? >> absolutely we do. but it's not the primary driver. our primary driver is strategy and other issues. >> any big acquisitions on the horizon for you guys? >> we are always looking out for new products and new technologies that are going to make a difference for patients and consumers. or that perhaps expand our regional reach. it is very important to make sure we provide a dividend to our shareholders. there are a lot of shareholders that depend on us for the dividends. we look for ways to reinvest in our business. after that, we look for ways to

buy back shares. we are really aiming at the long-term. >> years from now, what are we talking about with j&j? >> i think you will see continued success in the pharmaceutical business, continued acceleration in consumer. i am very confident that the size and scale of our medical devices will be paying off for patients and shareholders. >> thank you. outscore ski, the chairman and ceo of johnson & johnson. , the chairman and ceo of johnson & johnson. >> yahoo! is hoping to attract more viewers with a streaming concert series. but will dave matthews band convince viewers to watch yahoo! instead of you to -- youtube? ♪

>> welcome back to bloomberg west. i am emily chang. yahoo! is going to stream one live concert every single day for the next year and it all starts tonight with a performance by the dave matthews band. people will be able to watch the band laid two sets, one electric , one acoustic. is trying to win viewers away from youtube. yahoo! is set to release earnings today. how is marissa mayer doing? joining me now is jon erlichman n in los angeles and corey,

let's start with you. >> people are going to look at the results of yahoo! and not yahoo! plus alibaba, and they are significantly different. when you strip away the alibaba results, what you start to see our profits that are a distant third. profits that drop to a distant third. a substantial drop from the previous year. i think it is important to look at these over a year-over-year basis. drop-off andntial the company is barely making money compared to what it had in the past. when ali baba goes away, people are going to pay a lot more attention to the company and two has athen, karissa meyer

problem. >> she has been trying a lot of things. tell us more about these efforts. we talked about the dave matthews concert. how much progress are these concerts actually making? today, youe video have a few options. you can go subscription like netflix. in the case of yahoo!, their business is all about videos. video and good streaming video to share is a great place to start. that is why they have done all this different stuff. i think the jury is still out as to whether or not this is a successful strategy to go out and get archived conflict -- archived content. i think a lot of people would prefer to go to concerts. the value is not the same as sports.

has hundreds of .illions of unique visitors who are these people? >> a lot of them are legacy people who have set yahoo! as their home page or who use yahoo! mail. there are hundreds of thousands. we will be talking about that later on bloomberg west. ,hen it comes to the numbers providing a service for little profit -- let's talk about margin. ae margins for ali baba, for company like google, are close , they have yahoo! really fallen off to three percent in the last quarter. costdo not run acquisition us through the income statement,

but the acquisitions have brought them a lot of revenue. they farm out or delay the bad,sition, and despite you have falling margins. the pressure is inc. recently -- is increasingly on marissa mayer to perform. >> we are going to be all over yahoo! earnings later today. >> like a blanket. >> cory johnson, our editor at erlichman, thank you. young up, we will tell about a massive restructuring in which departments at microsoft could be impacted, next. ♪ >> its 26 minutes past the hour which means bloomberg television is on the markets. overall, equity markets are

lower following comments by janet yellen. markets are down, pretty much flat. s&p and nasdaq are also selling. after earningsay beat analyst estimates. we will be back with more bloomberg west after this break. ♪

>> you are watching bloomberg west. i'm emily chang. janet yellen has been testifying before the banking committee today. she questioned the valuations of social media stocks in federal court saying "nevertheless, valuation metrics in some sectors do appears substantially stretched, particularly in the social media and technology despitees,

estimates in recent years." microsoft is planning its biggest cuts in years. this round of layoffs could turn out to be the biggest in theosoft's history, topping 5800 jobs cut in 2009. cory johnson is with me here in studio. our senior analyst covers microsoft for bloomberg industries. this could be happening imminently. how big a deal is it? >> you are bound to see a lot of reductions. more importantly than that, the vision to change microsoft into a cloud first company. with that will come certain , andes, like it or not

that would be job reductions in certain areas. a memo aboutt out changes to come. >> it was the highlight of my vacation. what is happening here? >> he is trying to put his stamp on the company. he was the inside candidate, hand-picked, a guy who would follow the board's decision. nokia acquisition, making decisions about cash on a decisions. his hands of been largely tied. i have been talking to a handful of microsoft people, and they are really talking about the things they are seeing inside the company, certain people moving ahead of certain sales operations and making decisions

going forward. they are starting to make them move about his personnel and his team that will run things. this is a very big move to do all at once. not everybody likes this. ibm, for example. norman st packard, in layoffs. >> let's talk about that. -- enormous layoffs. >> let's talk about that. hewlett-packard has been laying off people by the tens of thousands. >> if you look at revenue per employee, companies like google and facebook are nowhere near what microsoft is, and microsoft was once on the cutting-edge of this thing. hewlett-packard, a little bigger. if you buy from hewlett-packard, and army will come to try to sell you more stuff. there might be one microsoft person who works with a company for a short time, where's the

i.t. departments aren't on their own. -- are on their own. , think this is more about rather than changing the way the business works, changing personnel and direction a little bit for this company. >> talking about trimming the fat, where is the fat? what divisions and areas do need to be cut down? >> i think it's going to be very interesting to see when this finally comes out. if you were to look at where this company has been for the and theeral years, whole world is moving more toward cloud and enterprise mobile devices. the question is going to be, where are they going to invest a lot of these resources going forward? the otherfely assume areas will probably see some layoffs.

has been doing a lot of interviews lately. he talked to the new york times. he highlighted efforts in ai. is that something that could be a big part of microsoft? the nuts and bolts of microsoft is selling windows and selling office. when you talk to microsoft salespeople, they will tell you to buy the next windows upgrade. they will try to get you to buy the next microsoft office. that is where the real money is. they appear to be cutting-edge because they want to bring customers along and get them to buy. there was a time you could get a corporation to buy all your microsoft's us. for is a really big deal this company. those kind of incremental doeses are what microsoft

every few years. increasingly, they're going to have to have some kind of glittery stuff on the edges to get microsoft to be the kind of business where they need to pursue the latest upgrade. >> needing to be on the cutting-edge and appearing to be on the cutting-edge are two very different things. can microsoft be on the cutting-edge when office and windows are there two biggest things? >> that is what i am seeing as they push new blood into a behemoth that pre-much dominates all the entire operating systems on the computer. as the world moves to cloud, can they make it? i think that is going to be the biggest question and challenge for the new ceo. ok, thank you both. the founders fund is known for bold investments in space travel

and robots. one of the partners is here with us. ♪

>> welcome back to bloomberg west. i'm emily chang. from investing in robots to state travel come -- space travel, it's one of the most innovative companies in silicon valley. what is behind their philosophy? joining me is founder and partner jeff lewis. you guys are always investing in things that sound crazy, from software for oil rigs to trying to replace bigs in the food chain. eggs in the food chain. what is your strategy? >> to invest in companies that are going to radically change

humanity. the stated mission of spacex is to get humanity to mars. longme cases, it takes a time for visions to play out. bryan singer is heavily involved trymerald therapeutics to to build an amazon like service for sciences. the are trying to reduce cost of life sciences by an order of magnitude. other investments we make are more about making things more affordable for every day people because that is also a really big problem. are are the companies that going to radically advance things across a wide range of industries? it is not always obvious in the beginning how they will invest -- advance things. know you have been thinking

about how the investment team will change the income gap. one definitely think important thing to note is that silicon valley is really out of touch on how bad people in this company -- in this country are actually hurting. the unemployment rate, if you exclude part-time work, -- if you include part-time work, is close to 50%. children are living in poverty. today's applications solve one percent problems. >> so you think silicon valley is being unfairly targeted. i think the dawn of technology being responsible for a loss of jobs is a dominant narrative that is unfair. it's far more about globalization than technology. in the long run, there needs to

marketty in the job through new industries. that takes a long time to play out. in the short term, yes, people are getting displaced. silicon valley is targeted because wealth creation happens so much faster in a way that is so much more dramatic than any other industry. it's obvious why we are being targeted, and we have done a very bad job of adding forth any kind of compelling narrative on why we shouldn't be. one solution is to work on technologies that will change the status for kids in poverty. other people are saying that because wealth is created so dramatically, maybe people should give more, maybe companies should donate a certain percentage of the equity they make. you think about that? >> certainly. as someone who grew up middle-class, i certainly

believe in giving back to one's community. i think there is a question around how effective many nonprofits are. it seems like there are very few nonprofit entities that are effective. i think there are some great efforts here in the bay area. i think everyone should come up with their own strategy, but i think once more important is for technologists to build technologies that will dramatically reduce cost for folks for things that matter. >> give me an example. >> a reason investment we made is in a company called wish. this is a company that on the surface looks like many companies. their vision is to build the world's largest mobile shopping mall. a few things make it different. one is that the prices are cheaper than what you can get pretty much everywhere else. >> even on amazon? >> generally. that's correct. if you are someone who lives in a rural area, rather than having

to spend money on gas and drive , you can go online, get close, get things affordably shipped to you. >> how does wish afford that? the argument is that amazon is eating their lunch. >> it's through overhead. amazon, the product categories are different. the technology under the hood is very different as well. about the merchant model. in wishes case, it is all driven by technology and machine learning. you go to the market strategy on service, it is

very different from amazon. >> what is the latest with left and how concerned are you about it? >> i strongly believe that regulation ultimately follows consumer demand. i think we have seen that play out. day, peoplef the need low cost transportation. people need to get from point a to point to point b really cheaply. we have only scratched the surface on this and we believe left is really well positioned capture value and grow. we are only in the first inning of that market playing out. i'm not worried about the regulatory stuff, personally. >> jeff lewis, founders fund

partner, thank you for joining us. >> today is the last day for the public to provide initial comments on the proposed net neutrality role. can half a million comments actually stopped the creation of internet fast lanes? ♪

>> whelping back. livingsocial has named an ebay executive it's a new ceo and president. wasceo announced he stepping down earlier this year. he had a variety of roles at ebay and shopping.com. livingsocial has had to close some overseas businesses and had some layouts as demand for daily deals went down. the fcc has received over half a proposedomments on its net neutrality deal.

cory johnson is back with me now. this is an issue you have been working -- looking at very closely that has captured the attention of a lot of commenters. >> it really has. when you look at net neutrality, open internet, what that might look like, let's first take a second to look at what net neutrality really means. >> al gore did not invent the internet, but he did invent the phrase information superhighway, and what better metaphor to notion the controversial of net neutrality. let's take a drive. guzzling hogging gas beast. a metaphor for a video we pull out of the parking lot.

interstate, the backbone of the internet, at full speed, as fast as 100 gigabits per second. the backbones are owned by a handful of private companies. all of our fellow travelers are traveling the same fast speed before we reach the exit. that last mile is owned by a small group of internet service providers like comcast, time warner cable, verizon. they have different rules of the road. gotten off the information highway at a blazing fast speed, but now we are hitting traffic. the netflix 18 wheeler monster truck was able to pay for their own fast lane. that's the kind of deal netflix struck recently with comcast, allowing their service to get to consumers faster than their competitors. is that fair? net neutrality would make it an even playing field for all the drivers on the road.

the toll keepers like time warner and comcast like it. for want their own rules the road. drivers like us just want to enjoy the freedom of the open road. ,> so, cory, as it stands now where is the fcc on net neutrality. it's a complicated world. some things do move faster. they say this proposal will protect the internet. they also say they want commercially reasonable favored access. so is it open internet or favored access? which is a going to be? they have gotten so many comments, a lot of it urged on new sundayver on his show. he got into some substance. he was kind enough to use some

bloomberg west footage. he told people to go to the fcc website. check out the tenor of the comments. fcc are inviting comments at this address. at this point, and i cannot believe i am about to do this, i would like to address internet commenters directly. good evening, monsters. havemay be the moment you spent your whole life training for. this build as the week went on. i was crunching some numbers. between midnight and 1 a.m. on friday after that show, the fcc comments per hour. people were flooding the fcc website and they continue to.

>> so what are they saying and do they matter? >> that's a great question. how much will they listen? from what we understand, they have never seen anything like this. we talked to some of the early chairman of the internet. they wanted this. the fcc created this impart to respond to things like this. tom wheeler is certain to pay attention to the uproar. i think if anything is going to succeed in terms of public comment, it will be this, because this was why the internet was created by the fcc. eriodd so the comment p ends today? >> an eula that the timing from when they initially proposed these rules, the public, and deadline of today and reply deadline of september 10 and

then the date for the fcc votes, that is a day to come, we don't know when that's going to happen. >> well, we will be all over it when we do know. >> great story. >> it is now time for the bwest byte, one number that tells a whole lot. have the bite today. >> let's talk about turtles. performedes admirably. they are excited about the nascent media business, like this turtle video that has gone viral. guy saves a turtle from a fishing line and the turtle circles back and kisses the diver. rely on one retailer 13% for sales.

>> thank you, cory. thank you all for watching this edition of the show. ♪

>> i am mark crumpton. this is bottom line, the intersection of business and economics with a main street janet yellen says monetary stimulus shall continue. johnsonside johnson & for a live interview with the cfo. and a massive telescope takes us to infinity and beyond. to our viewers here in the united states and those of you joining us from around the world, welcome. we have full coverage of the stocks and the stories making headlines today. a bloomberg exclusive