>> welcome to "bloomberg west," where we cover innovation, technology, and the future of business. ahead, ibm's efforts to sell its money-losing chip manufacturing operations. they were considering a deal. ibm has been trying to shed unprofitable units. they have tried to increase profit margin and reverse nine straight quarters of sales declines. and get ready to see cars with pink mustaches on the streets in new york city. lyft officially launches in the big apple today.

and the challenges of doing business in china. the latest american company having issues is qualcomm. it is having trouble collecting millions in licensing revenues. we look into whether qualcomm can force chinese manufacturers to pay for a chance in the hundreds of millions of phones. to our lead story, ibm has been dealt a setback as it tries to load its chip manufacturing operations. global foundaries have offered to buy it, but they thought the offer was too low. joining us now is ian king to help break the story. ian, this is a big deal for ibm, no?

>> this is a company that rarely -- clearly sees itself going in a new direction. new computer services. >> what is this business? how big of an investment is involved? >> ibm has been around in the chip business for a long time. they used to supply apple. >> remember we are talking about this is a new thing, but they made the apple macintosh chips for a long time. >> one of the fundamentals of the chip is the body economics and intel and -- they're not so good at running plants from what the numbers show. >> i know you covered intel and

the building of the next foundry -- how much does it cost nowadays? >> basic stakes to build a state of the art chip between $5 billion-$6 billion. >> that is my point. is this the sticking point in negotiations? how old are the foundries we are talking about? >> there are other people we have spoken to. if you look at the fiscal end, that is -- that is a bit newer and up-to-date. it is still going on. at that point, you had to say, it is really a long way behind what the state of the art is. >> has ibm written this off, do

you know? >> companies have depreciation schedules. a lot of things get depreciated. we don't really know. >> what do globalfoundries like about this? >> globalfoundries used to be of the chip plants amd used to own. they really want to be in this boundary is this where they are making chips for everybody. >> semiconductors. >> that is exactly where they want to be. science, researchers, expertise. you can't pick that up anywhere. the physical entities did not have a lot of interest in them. they have their own plants in upstate new york, i believe near albany. they don't need secondhand fabs. >> but these days in 2013, 2014, are they so different from what was built a decade ago?

>> it is not like a car plant and with relatively small upgrades where it is still relevant. it does not necessarily start again, but major overhauls to these machines that cost tens of millions of dollars each. you pour a lot of money in and it becomes obsolete so quickly. >> what is it about the process of building chips that is so continuously revolutionizes. >> as the ceo of global foundries, they said it is not rocket science. it is much more difficult than rocket science. it is microscopic. it is one atom thick. imagine doing that. it is not easy. >> that is an investment they

want on their own. ian king, thank you very much. great scoop. we appreciate it. shares of amazon got hammered today for the most recent quarter. the biggest loss since 2012. the rough earnings report comes from the shipping of the fire phone today. emily and i spoke with the aol vice president. we asked if he has had a chance to look at the fire phone. >> i haven't got my hands on one yet. i'm waiting with everyone else. >> seeing things in 3-d? >> i don't think it will be a big hit with consumers. >> why not? >> for amazon to differentiate properly, they need to either be lucky enough to have first mover advantage which they don't have -- >> last mover. >> pretty much.

they have to create something that is so mind blowing, people cannot live without it, which i think this device is not that, or they have to compete on price. >> one of the intriguing things about it is this app that lets you point at something like it. it is called firefly. i would imagine it converts to sales a lot faster. from what we understand, it doesn't fully integrate a lot of android apps that come with a lot of other android phones. i expect amazon to do another version. for a certain prime customer, this might be something. there are amazon geeks out there who love their amazon products. >> who are these people? there are a lot of other apps that people use every day that are not on this phone, but who are these people that want to buy things on amazon all day long?

[laughter] >> i'm not sure who they are. >> exactly. >> when amazon got right with the fire tablet, this is all about price. they came in with the android esque device way under competition. this phone is going to be costing just as much as any smart phone on the market today. your best bet with the greatest advantage to owning this thing is that firefly feature. why not just distribute that? >> the timing suggests they might be willing to cut price. >> like i said, i think the next version has to be much more competitive. first versions like a phone, they are never that great. i want to give them the benefit of the doubt a little but.

it is the strategy i don't see getting ahead. >> the thing is we don't know how many kindles they are selling or set top boxes they are selling. why aren't they giving us these numbers? maybe they are not good. >> i really feel like for most companies when they don't give data, it is bad news. or if they reduce the metrics they are giving us. we have seen that with so many companies in the past. i think they would prefer not to give anything out. they are giving the bare minimum. once they need money and now they need wall street stock options in order to pay their employees who are otherwise paying subpar salaries. >> that was emily and i talking to the aol vice president. we will be back on "bloomberg west." ♪

>> i am emily chang. this is "bloomberg west." google gives us an update, saying that citizens have the right to be forgotten online. google has received more than 91,000 removal requests according to a person familiar with the matter. they have looked at more than half of those cases. they have asked for more details in about 15% of cases. the news comes as privacy officials from across the eu meet in brussels to consider new

privacy guidelines. it is official. lyft is fist bumping its way into the big apple. they are making positive progress with local and state leaders. the pink mustaches will hit five boroughs tonight at 7 p.m. what did they do to be able to get on the road? matt miller has followed this story very closely. matt, what exactly did lyft agree to to make this happen? >> i feel that they sold all of their principles out and decide to become a regular cab company with an app. >> how very new york of them. >> exactly. i don't see how any of this progress is progress or positive. there are only allowed to use tlc, taxi and limousine commission cars. they're only allowed to use tlc, taxi and limousine commission drivers.

the whole point of lyft it is a peer to peer ride sharing service. if i am driving and i am a qualified lyft driver and you want to go with me, i can swing by and pick you up and we split the costs. that is the idea. this is not that idea. i think it is awful. >> so we're not going to see you or alexis ohanian of reddit hitting the streets tonight picking up random -- >> not unless i figure out how to get the taxi and limousine commission to give me a license and fit out my car with a license. i think cory is probably legally allowed to do that because he is to be a yellow cab driver. >> do you still have your license? >> my taxi license has long since expired, matt. new york city has a history of dangerous and bad drivers, which is why the license requirement began in the first place. licensing above and beyond and

not just having drivers, but a class five license in new york state. >> but the yellow cab drivers are the most dangerous and bad drivers in the entire city. >> that is not true. >> ugh, i know so many people who have been hit by cabs. >> let's just say that their safety standards are higher. how is it different from what uber is doing? >> it isn't. >> it is the same? >> yeah. >> what about the vehicles themselves? >> uber has to have a tlc license driver and vehicle. this is kind of the same thing as uberx. i guess the one benefit is it will be all over new york. previously lyft was going to launch in brooklyn and queens. they had a business case for that.

they thought it was underserved and it was compelling, but now it will be everywhere -- in manhattan and staten island and the bronx. i guess that is a positive for competition. >> do you see a way forward for true peer to peer ride sharing? is there a door that could open in the future? >> the key is to get the drivers that they have properly insured. lyft has claimed it has got $1 million of primary insurance for each of the drivers. if that is the case, it is a bigger policy than new york taxi drivers have. i don't see why that is stopping them. i think the problem is regulators in this state are working in the 20th century. these kinds of ideas are new and too confusing for them or they break the status quo. it is definitely not something the taxi limousine commission wants. this is the kind of city where

that commission holds a lot of power. it just seems to be such a bummer. that is my official take on it. bummer. >> bloomberg's matt miller in new york who may never be able to catch a yellow cab again. [laughter] you can hear your gps talking to you. there are road sensors and cameras. we look at how smart navigation is changing the way you drive next. ♪

>> welcome back to "bloomberg west." i am emily chang. we turn to our wiring the world series. we look at how technology is shaping the future of

transportation. many drivers see gps technology as a crucial tool to get them from place to place. modern navigation systems can make roads safer and save time and money. the vehicles can pull data from road sensors, cameras, even stoplights. we have here a guest from a consulting firm that helps with mapping technologies. cory johnson is still with us as well. how smart is smart navigation right now? how smart can it become? >> it is an evolution. it is getting smart all the time. it is getting there now. you start to see things -- a few years ago people were getting very preliminary traffic data.

we are getting peer to peer traffic where commuters are talking to computers in real time and giving people that information. you are seeing information about even driver assistance. it is an interesting preliminary start, but it has not started to connect that together. we will continue to get smarter as cars continue to do that to each other. >> we're talking about cars being able to stop at stoplights and truly talk to other cars. how far out is something like that? >> again, it is coming bit by bit. >> waze will tell me when there is a red light ahead. [laughter] >> it will tell you what other cars are doing. what they're starting to do is they are looking at what is happening on the car and how to get information out of that. for instance, if you saw a bunch of braking of cars on the road, that information can be translated back to you and gives you interesting information. that is the type of stuff that is starting to come in.

companies are looking at the onboard diagnostic. it gets a lot of information on what is going on in the car. it is very powerful. >> there was a website called traffic.com. i remember they were doing this ambitious project of literally dropping sensors into major freeways in every major city in america. is that still something in the future that the world will get? because of gps, you can't tell which lane that ladder is in. >> now we are all carrying phones around. those phones are being monitored and they know what the traffic is. the way people like apple and google and other traffic sensors is they are seeing how fast traffic is going. it is a very quick response. those types of things are

getting replaced by rather infrastructures getting replaced by phones that people are carrying already. >> it seems like your car's navigation system can never quite keep up with what you can get on your phone. is that forever going to be the case? will the car navigation keep up with technology? >> i think that eventually will change. it has taken forever. the car manufacturers have long development cycles. you bought your new cell phone a year ago and you have got a six years jump on them. tesla is a great example. they upgrade technology in their cars. they are small. the nav system on my car the same as on my iphone. you can get systems that give you predictive traffic, access to things.

you talk about infrastructure. what parking is available so i am not circling the block? where is a parking spot available? it is spread out amongst a bunch of apps. it is all on a bunch of apps. that needs to be connected driving experience. >> marc prioleau of prioleau advisors. always great to have you with us. >> nice to talk to. >> still ahead, handset makers are not paying qualcomm royalty fees. it is impacting the company big-time. ♪ >> time for bloomberg television "on the markets."

let's take a look at where stocks ended for the week. down on the last day of the week. the s&p coming off its record with .5% decline. a small combination of worse than estimated earnings, as well as a worse than estimated durable goods reports pushing stocks down. ♪

>> this is "bloomberg west," where our focus is on technology and the future of business. i am emily chang. the online scrap booking service says women makes up 40% of the staff. that compares with a roughly 30% female staff at companies including twitter, google, and facebook. like other tech companies, the pinterest workforce is 92% whites or asians. they still have a lot of work to do echoing tech companies to

getting a more diverse workforce. for many american companies, china is a complicated and challenging market. qualcomm says it is having serious problems collecting licensing revenues from chinese smart phone makers because the call caused stocks to get hammered this week. they're also being investigated by the chinese government for being a possible monopoly. what is going on here? cory johnson is still here and our guest from new york. he has lived and worked in china for almost two decades. gordon, what exactly is happening here? >> you have the national development and reform commission accusing qualcomm of anti-monopolistic position. at the same time, you have

chinese handset manufacturers see this enforcement action. they are saying, why do i have to pay qualcomm? it's difficult for the san diego company to sign off anyone to pay royalties. they're all waiting to see how tough beijing will be on the company here. >> this is an enormous development. it suggests the very basic laws of intellectual property that a company like qualcomm that has a majority of its revenue coming from licensed chips, the rate basis of intellectual property isn't going to hold up if china doesn't want it to. >> we have seen since the end of 2009 with a concerted attack on google a real effort to undermine foreign business in china. if qualcomm wants to see what its future will be like in the country, it should look at what happened to that search engine. google is still in china, but no longer the force it once was. what the chinese government wanted to do was to help local companies. baidu became very big in terms of market share. the same thing will happen here in the chinese government will force manufacturers to try to use other technologies.

i don't know if they will be successful or not. qualcomm will have to wage a long-term campaign. it really doesn't have much in the way of assets to wage that campaign. >> qualcomm is also being investigated under china's anti-monopoly law. has qualcomm done anything wrong that we know of? >> we really don't know and we may not know for quite some time. this has nothing to do with right or wrong. they were going to roll out their 4g network in china. they really were offended by the idea of paying royalties to a foreign company. they were going to attack qualcomm. qualcomm is not the only company. we saw since a year ago the commission has gone after also internationals and wanted them to confess. clearly we have one company in a long pattern of targets in which almost all of them are foreign. even if qualcomm did do

something wrong, most chinese companies end up doing practices that are much worse and they skate by because this is open season on foreigners. >> we talk so much about facebook and twitter which are blocked in china. we now we are talking the hardware companies. licenses is one of the biggest profits for qualcomm. how much could this really hurt qualcomm? >> this is the worst nightmare for qualcomm. they built an entire business that has now become the first or second largest chip company in the world, along with intel trading on the stock. their very business is about research and development and enforcing patents through intellectual property laws. if those laws don't hold up, the whole model falls apart. some companies are saying if one chipmaker isn't paying you, why should i pay you? the other interesting thing is

some companies are saying, you know, i sold 10,000 of your chips. what will you do about it? qualcomm could lose money. >> in order to build relationships, describe the process for which a company like qualcomm tries to maintain a foot on the ground? the long dinners with chinese officials? i want to hear how they try to keep these relationships strong. >> qualcomm has started to invest into tech startups in china. it has got this $150 million fund. essentially, the other thing they're doing is they're

bringing their production into china. they will be making chips there. that is what the chinese government wants. once they starts to learn all of this knowhow and technology, it will be able to take it, give it to local companies. qualcomm is going to lose its business. there is a wining and dining aspect of this. i think that is the wrong thing for them to do. it shows that the chinese will say, oh my gosh, the americans are owning our companies. we have got to get back at them. this makes qualcomm a much bigger target. >> qualcomm, i should say, has been through this before and they have been through this all over the world. they have eventually prevailed everywhere they have faced this, including china, but it is worrisome for all of the reasons that gordon cites. the next generation will be the future of wireless. from now on, qualcomm may not have the same stake as they had in the past.

>> gordon chang, thank you as always. from the moment you book your flight to the minute you leave the plane, jetblue is using text to make traveling easier. we sit down with the company's chief information officer next. ♪

>> i am emily chang. this is "bloomberg west." we turn back to our wiring the world series. we look at how technology is changing the world of transportation. jetblue is turning to tech to make flying easier. how is the company using connectivity to make flying more efficient for pilots and more enjoyable for passengers? the jetblue chief information officer, eash sundaram, joins us. you just launched automatic

check-ins. how exactly does that work? >> great to be here. we just launched auto check recently. we have seen a lot of success with that. jetblue is into its second decade of operations. we look at constantly enhancing the customer service and experience. auto check-in is a great way to move forward. when you think about going into a baseball game, you don't check in. so why did do that at the airport? we look for it to be more transitional in nature than transactional in nature. we look at every step using technology to either a) eliminate a step in the process so customers do not need to look through that, and auto check-in is first of several of enhancement steps. >> i can understand why you might check in at the airport. if not enough people check in on the flight, more people can get on.

what about internet connections to speed up the process? explain how that works. >> when you think of a company like jetblue, we don't have that challenge of people showing up. checking in was a 1960 process when airline started using computers. the only way is for you to be checked into the process. today with modern technology available, we know where the customers are. if you could use real-time information about the customers and send that boarding pass to the mobile device or other channels, that experience is much more seamless. anything of the future, we are thinking about why even a mobile boarding pass? can we give a permanent boarding pass for the customer so they can walk through that airport experience. >> eash, why's it so hard for the airlines to adopt these things? is it because of the legacy systems?

legacy hardware? >> a combination of both. many airports operate under a common use with several agencies working through it. and the airline industry by itself has grown through acquisitions of several software systems. we use over 400 systems. things might be easier in other industries get difficult. that doesn't give us an excuse to not do things in a certain way to the two important things we look at for jetblue is personalization. how does it serve the customers needs? second, where do you have to do certain things where you can eliminiate the process? nook and focus on the real customer experience. >> you also use connectivity to use flightpaths and enable planes to talk to one another. tell us a little bit more about that? >> absolutely.

about four years ago when jetblue was one of the first to have connectivity on flight, we partnered with a company and launched a satellite about two years ago. we have a spectacular product available now for customers. think of aircraft with 150 passengers getting 12 megabits per second bandwidth per customer which is very amazing. you take a look at the customers having that access. whether it is in flight is that the cockpit, they're making it in real time whether it is managing flight operations or managing the customer experience in that way. >> what percentage of revenues do you devote this kind of technology that makes it -- you say the download speeds are so

much more better. i wonder if you have a much bigger budget for technology to consumers and they what that -- wonder why other airliners don't. >> we are a very tech savvy come especially being a young company in its second decade. we look at technology as what will link us to customers and our crewmembers in a highly efficient way. i can't get into the specifics of the budget. when you think of wi-fi, wi-fi in the air, it is an experience. we don't look at it as something in which you offer at high fees. customers cannot afford it. today that experience i am talking about is absolutely free for the basic service. if you want to stream videos or other things on the plane, there is a nominal fee for that. you walk into a hotel or your home, connectivity is expected. that is how we look at it as

part of the offering. >> all right. jetblue chief information officer, eash sundaram. >> thanks very much. >> the tesla ceo and more next. ♪

>> welcome back to "bloomberg west." i am emily chang. telsa and spacex ceo elon musk stopped by to talk about cars, space, and the future. they talked about making the telsa a more friendly car.

>> we want the car to be your friend actually. with the new version of software coming out, you will get to name your car. like it is a cat or something. >> really? >> yeah. [laughter] >> what would you name it? >> i have named my car. i named it "old faithful." >> that is nice. don't name it old yeller. [laughter] >> colbert also asked him about the possibility of creating human jet packs. he said that would be too challenging due to the laws of physics. comcast is doing an effort to boost slow internet speeds. it'll gave a few lucky customers

505 megabits per second. cory johnson has more. >> the internet is drastically changing right now. companies are inventing new high-tech gadgetry to send data at previously unimaginable speeds across the web. the internet seems like it is changing. >> the internet continues to change. we are changing the way we use it for all aspects of our lives. look at cloud computing. we are taking our home network, dvds, vcrs, and music, and putting it into the cloud. you can not only increase the capacity of the internet, but reduce the cost per bit. it should cost less.

>> until recently, i saw the google fiber. it is still in the experimental stage. are we really going to see that kind of development fiber to the curb? >> fiber to the forehead. it is clear this will be a main direction of companies. that they did a great job of having a bigger pipe for the home. what they have done is create competition. everybody wants to create the ability to attach to the home and control the user. the users have a lot of choice today. >> they made possible of things that were impossible before. >> that happens all the time. there is a circuit -- >> it is an optical circuit?

>> you bet. >> you switch literally at lightspeed? >> not at lightspeed, but it will bring down costs. >> we certainly have a desire to do it. there is a great concern about the regulatory structure to do it. we did a piece about comcast lobbying and stuff. john oliver ran with it. it is drawing so much commentary. what is your take on the proposed rules? >> i am a big believer in free market principles. if you look at the internet infrastructure, someone has to make a large capital decision. think the free market should

help pay for it. >> the concern is that startup companies will not have access to that when someone decides they could charge the providers. >> that story is being speculated. >> that is happening in the case of netflix. it is actually happening. >> i don't consider netflix a startup. >> that is the point. a startup cannot compete with netflix even if they had better service. >> i don't think anyone should decide netflix will be penalized by a startup or the startup will not have an opportunity. if i was netflix, i would be worried that had to pay for all of this capacity. at the start of has a better way. it might come up with something more animated that doesn't require as much bandwidth, including new service.

>> we can only hope. i should point out netflix is opposed to the very rule is they would be forced to pay for it and they don't want to. thank you. interesting stuff indeed about the new developments on the internet. >> cory, hang on. it is time for the bwest byte, one number that tells a whole lot. jon erlichman is in l.a. cory, what have you got for us? >> 10. they operated with no social network virtually. they started trading again today. it traded after 10 days suspension. it fell 80%. i guess you guys cover this when i was out of town. it was a fairly amazing thing. >> it is still up 700% from where it was a year ago. jon, this company promised to connect you with hollywood's stars.

has anyone in l.a. even heard of this thing? >> i think they're thinking about it in terms of the possible movie script. the first social network was about facebook. this is the social network with a question mark. the fact that you go to this headquarters to this company, there is no suite 400. the landlord did not even know that a company existed there. >> it appears the stock was pumped up on twitter. how often does this happen? >> pump and dump stock promotions are as old as stocks themselves. it is always the latest thing to use whether it is fax machines or phone calls or twitter. that is how stock promotions happen. >> all right. we will see what happens over the weekend. thanks to all of you for watching this edition of "bloomberg west." you can get all of the headlines all the time at bloomberg.com. ♪

>> this week on political capital, how foreign affairs -- house foreign affairs committee chairman walter dillinger on what is next for obamacare. margaret carlson and megan inrdle on poverty proposals who will win the georgia senate race. and who will win the georgia senate race. we begin the program with house foreign affairs committee chairman ed royce of california. thank you for being with us.