. . >> live from pier 3 in san francisco, welcome to "bloomberg west," where we cover innovation, technology, and the future of business. i'm emily chang. apple has become much more than a computer maker. it has become, in fact, a global phenomenon. riding a wave of blockbuster products to become the most valuable company in the world. now, we are just moments away from the start of apple's latest event, where it is expected to unveil big-screen iphones, a wearable device, and much, much more. over the next two hours, we have complete coverage of the apple announcements, and their impact on business, technology, and consumers, in a show we are

calling apple's next generation. .ur guests include keith rabois to talk about the look and feel of these new products. joe brown, who always gets into a straight. paul kedrosky, early-stage venture investor. and much more. i want to head to cory johnson, who was outside the event at the flint center in cupertino. corey, what is going on there? >> let me give you a visual here. we are here the anza college, on the outer edges of silicon valley in cupertino. they have taken the center of the courtyard and next to the performing arts center, with a product will be announced, where a lot of important events of happened, whether it was the

hewlett-packard shareholder vote, or going back to the original macintosh announcement, it will be the home for the announcement of what we expect to be too new iphones, iwatch, a payment system, and who knows what else. they builtcourtyard, a giant white structure that people are calling a qubit. it is not acute, it's a weird trapezoidal shape. it presumably will be a demo hall or something like it. it is a beautiful spot here in silicon valley. it's a lovely day in the foothills of the nearby mountains. digeroti, tech ceos like melissa meyer just arrived a little while ago. her id being checked. dr. oz was here a little while ago. about how these

devices will help people in real time tracker health, and convey that information to their doctors. the importance of the iphone, and what it means to people's by theis really stressed attendance here. in cupertino,n where steve jobs unveiled the very first macintosh computer. for more and what to expect from apple today, i want to bring in also paulfrom wired, kedrosky. joe, i will start with you. is apple going to make history today? >> apple kind of makes history anytime it makes one of these events. with the gets one of the biggest thing that's ever happened. think apple is turning over a new page. previously, these events have been really close down. whether they are going to release two new iphones, or one

new iphone and a wearable, or a brand-new thing for health, the thing we should focus on is how much more of a public event this has been. to the big building, to the number of press. there, andizmodo are they do have this big demo center. it's a big change from what the old steve jobs era used to have. you wouldn't really be able to get your hands a phone unless you were part of a very elite copyright -- cadre of press. >> they are taking the stage in cupertino. apple, we expect, to come out with something already exists. iphones, that other companies are already making. a smart watch potentially that other companies are already making. how much more can apple really move the needle? >> i think it can a lot.

steel shares from itself. we've seen what happened ipad sales in recent quarters. one of the problems is they are being eaten away by lower-priced products. apple will take a shot potentially at their own product iphones.ching larger in a sense, they can grow business by stealing from themselves. the second one is by launching a whole new product line. apple hasn't done anything to launch whole new product for at least three years. this is the first time they have gone outside to try something new. i give them credit for trying both things. raking the formfactor, and breaking into new product lines. >> the apple store is currently down. when he goes back up, we are expecting new products to be there, including larger phones. steve jobs once said this was something they would never do. you can't get your hand around it -- no one is going to buy that. expectingday, we are

a 4.7 inch screen, a 5.5 inch screen phone -- i don't know if that is still a phone. >> steve jobs is no longer with the company. i don't mean to be crass about it, but people want big phones. the market is showing up. sales,look at phablet they are huge. one, and eight. this is the hottest phone. it's big enough i can get in my pocket. -- i can't get it in my pocket. it's a big departure from them. and your hand can't get around it. or at least mine cap. we are hoping they will release software that will help. new technology will allow you to use the phone one-handed, and accepting third-party key part -- keyboards that allow gesture-based typing. we will see how it works. features are you

expecting? >> camera. nothing different this year. we are also expected to see maybe a sapphire display. something that will be more durable than gorilla glass. isn though gorilla glass super strong, our phone still get scratched and cracked. sapphire is stronger. we are also going to see an fc -- nfc payments. they're giving into near field communications. in the united states, nearly half of iphone owners have a phone that is three years old. at least. isl, we know that the iphone apple's biggest moneymaker. from a business perspective, how much of these new phones going to impact the bottom line? how much more money will they make? is this going to be a massive upgrade cycle?

>> i think so. i think it is probably going to be the largest, certainly getting back to iphone two. this will be the largest cycle and apples iphone history. it's the latent demand for and apple is, finally adding one to its product family. one is this deterioration in the ipad and tablets sales. people are voting with their dollars, saying i would rather have a phone. that is important, not just because it eats at ipad sales, but because the upgrade cycle on phones is turning out to be much faster than the upgrade cycle on tablets. apple's into troubled by the idea that people might move away from tablets to larger phones, because they can push an upgrade cycle much faster than they can on a tablet. that's great for upcoming quarters. upgrade theot tablets, but they will upgrade their phone.

cory, apple is showing off a phone that has curved edges, a protruding camera. some things we had respected, coming true. expected, coming true. >> when we talk about payments, and we talk about ancillary business models they might get littleike a watch, this -- they sold 150 million phones last fiscal year alone. there is an enormous ecosphere that apple has control of. 800 really credit cards out there, and lets them build a strong base and use the things that base has given them to launch businesses that no one else could launch with such scale. >> apple, unveiling a phone with curved edges. ve hase we currently ha square edges. we will head to break, more with

kedrosky after this quick break. ♪

>> i'm emily chang, and this is streaming onst," your phone, your tablet, and apple tv. joining me now is paul kedrosky, and john maeda, former president of the rhode island school of design. john, we've just seen the new phones unveiled at apple. they have encouraged it -- a curved edge, 4.7 and 5.5 inch screen. what do you think of the curved edges? >> that has been forecasted for money years. we see them in tvs, and here we have it.

>> is it more comfortable? -- we will bel told is more couple. but it is a brick. >> paul, how about you? >> i'm in the same camp. the televisions didn't excite me, and it's not clear to me that even with the portable devices will change very much. i more adjusted in the dimensions coming out. it's remarkable how much thinner these things are getting. story inre important the end than the curved screen. kudos to apple for shrugging the size. >> how much of a design challenges that, jon, to make the phones that are -- thinner? >> it's huge, given the software -- the hardware inside that thing. a curved surface might fit easier in our pocket. some of it will play out in how we where it and feel it?

>> will be more enjoyable? >> slightly. what will be interesting to see is who gets squeezed? a thinner devices that are volume, thinner volume generally means fewer components, which is unlikely, or someone gets squeezed out as something gets consolidated into something else. interesting in the component supply chain who got pushed out, or whose devices are smaller. that will be important, to see how those companies do in the coming weeks and quarters. >> now that we have seen the phones, i want to talk about the expected smart watch, or some sort of wearable device whether it is the iwatch or i banned. it will be the first new product unveiled under tim cook. i know you are very intricate and wearables, you wear them sometimes. what are you expecting from this?

>> and expecting to save a lot of time. people don't have to pull their phone out of their purse. it takes over half an hour every day just taking it out of the holster. it saves us time. i like that. >> ball, do people want to wear a smart watch? >> i'm people, and i want to wear one. maybe i'm not people. -- i'm people, and i don't want to wear one. these, it'snt of really high. i have this elephant graveyard of abandoned wearable devices. them to my kids, i let my kids look at the latest mark watches and wear them. they abandon them in hours. it's not clear to me what the real killer app is in terms of driving people to say i want to put something on my wrist that i had largely abandoned in favor

of another device. stuff gets consolidated, it doesn't get to come back again. >> this is a market where samsung already has the galaxy gear. the moto 360 was just unveiled. what does it mean for regular watches? e challenges to great something that people want to wear. watches have been a similar style. >> and i thing about a watch platform is that it is small. the design constraints are severe. developers the iowa now working on a smaller screen size. we will see new apps because of the formfactor. >> should rolex be worried? >> no. they have the power of a time was mechanical platform. the new stuff pushes the old stuff new again. statisticsoking at that women don't wear watches as much as men, yet they are two

times more likely to use a fitness app. perhaps this could be geared to a more female audience than people like you. >> me again. darn. demonstrablymen, unlike me. it will people that want all of this personal of limitation data about their body and how it functions. health and fitness will be the place to focus. i get all of that. i'm just unconvinced that this is a major new market for apple, absence some sort of app that changes how you think about this device in your wrist. all that functionality is rapidly disappearing and going at other places. >> we will talk about that very thing in the next section of the show. talking about what kind of impact this will have on our habits and health care. wel kedrosky, john maeda, will be right back. howurned a wearable and

apple smart watches stand up against fitness trackers like that bit. ♪

>> welcome back to "bloomberg west." we are covering apple's event in cupertino. unveiled two new iphones, the iphone 6 and the six plus. a 4.7 inch screen and a 5.5 inch screen. i want to continue our conversation about what is to come, which is a wearable device from apple. paul kedrosky is still with me, as well as john maeda, former president of the rhode island school of divine -- design.

i want to talk about this in the health care space. there are other wearables out there, the job own, the fitbit, the nike band, the misfit, which i note you wear. u wear.h i know yo misfit is thing for the battery life. alas for three months, is disposable, but i don't have to tend to it. >> what kind of features did you want to have in a smart watch? >> i wanted to last a long time on a single charge. like a about things pedometer, a heart rate monitor, a blood sugar monitor, sweat monitor, a breath monitor? >> it will all be in there. i'm most excited about what apps will come by having such a formfactor, and having all of the developers make some thing for it. something will happen. >> when you think about the

potential for all of these different features? much doll matter -- how they all matter? >> they all matter in these niche markets for people who want to create data or track health issues. maybe apple can innovate in terms of how you collect heart rate data. no one likes using those wraparound straps that you used to have to use to collect heart rate data. there is lots of room for innovating area it still ducks the question about who wants to track that data, and what good is it? many medical practitioners will tell you the larger the data that you collect, the more likely you find anomalies. and the more likely those anomalies mean nothing. the problem is we collect more and more data, we have to be careful about what applications we draw from that. from this giant archive of

explorable data that we have about our own bodies. there is all kind of interesting things that will come up from this, some of them very positive. some of them worrisome. >> we know apple has been working with the mayo clinic on -- in the future, the possibility of your doctor being called when some thing's wrong with you, before you even know it. is that really possible? paul? >> sorry. it is possible, but i think you had better really have good health insurance. you will get sued. it's like having something abduct your 911 system, and you are constantly calling the police. there's a reason you can't mainline your home alarm into --, there are fault in many far too many false positives. physicians cringe at the idea of your monitoring load sugar -- blood sugar through eye secretions.

you are not going to have emergency.laring an what constitutes actionable data? it's interesting, but so far away given the wild fluctuations in the data collection. >> from a design perspective, do you need a different sensor for each one of these things that this device may be able to monitor? >> there are so many sensors out there, it is not hard. what is hard is making an experience on your wrist that consumes less power over time. from a design perspective, a lot of great designers will make great things on that platform if it comes out. companiesre a lot of doing this already. can apple do it better than anyone else? >> it's the people that design and build ios applications. design turner at

kleiner perkins. bloomberg contributor editor john could rossi. -- paul kedrosky. we will have more than a hour. ♪

>> you are watching a special edition of "bloomberg west," --apple's next generation. we learned they are adding a new motion processor for the new iphone. we focus now on their plan to turn to mobile payments. had tok on what they unveil today. >> today, we are launching the biggest advancements in the history of iphone. joining me again is joe brown, deputy editor of wired. ,lso with us is keith rabois

former member of the paypal mafia. cory johnson is is with us from cupertino. we know the health chip is in there, we know it's going faster, we know it's bigger. what else. ? >> it has a great big screen. when million pixels on the iphone 6, more on the iphone 6 plus. i'm a little bit heartbroken that all the rumors are true. no surprises anymore. is really good for something elevation. if you give you great health access. your elevation, that's one more variable the phone can use to track you. the maps will be better. >> also, an accelerometer. >> all phones have an accelerometer. on this new iphone, because it's basically a tablet, it has that new landscape orientation for the homes green, which we have been wanting since the original

iphone came out. >> we still don't know if it c capability, or chip that will allow you to pay with your phone. keith, what do you think about what has been unveiled. ? >> the haste which have gone to the announcements, which seems to say they have more to come. usuallyt 10 minutes are updates, and went right to new devices. that suggest in the next half hour, they will see cool stuff. >> we will get the payments in a moment. cory, your reaction? new iphones, bigger iphones, but also, what we expected. >> you mentioned the accelerometer. every nuclear bomb also has an accelerometer. hopefully there will be no nuclear devices attached to this iphone. the house focus is really important here. the corporate culture reason --

in ways that steve jobs certainly was not, tim cook is a health nut. of time trudging around the apple campus with a bottle of water and handed and an energy bar in the other. we see the health focus of the iphone, when we know there is a watch coming around, we imagine what sort of capabilities it will have. paul was talking about the heart rate monitor, predominate, dr. ross was here earlier and i was talking to him about things in the phone that will be held focus. you start to imagine tim cook is thinking there is a big market for these technology devices -- the phone, the watch, the software and the semiconductors in them -- to give us health information that could be a much bigger market for apple going forward. >> what about chips, and will it open up the market for apple? keith, you know this market better than anyone. what does that actually look like right now?

it's hard to figure out who is winning this market, if anyone is at all? >> i don't think mobile devices have transformed payments yet. apple has a couple of key ingredients, but they are mostly removing obstacles. has a lot of those cards, they talk about. authenticating a device or payment is a copy gated pay more -- complicated painful procedure. there is not a value proposition. how theyresting to me will frame a payment project. that's been missing from all of the rumors. >> if they partner with the zen master card, does that mean much? >> it fundamentally comes down why would consumer change behaviors. credit cards are in a bad project -- aren't a bad product. if you have a new value

proposition, consumers will switch. well howerstands quite to frame value positions. i'm awaiting to see how the announcer, and why they announce it. >> 41% of people know about google wallet. only 8% of actually used it. >> that's being quite charitable. >> people aren't using these your products. >> where can you use google wallet? there was a wild you could use it in taxis, cvs and walgreens. >> square the same problem. >> square is not focused on the can -- on the consumer side. square is for merchants. analytics, payments, remote selling. it has really become a merchant services product suite. >> putting on my consumer hat --

square is the best credit card reader for me. when i use square, i'm delighted. i know i will get the e-mail. i don't have to sign a piece of paper, and hold the thing still. it's just super easy. ads and nfp chip, retailers have to follow with the right hardware. >> there is hardware that substitutes for nfc. do they frame it as backwards compatibility? do they move to bluetooth only, more vast technology. it may be a superset. >> it also may be a security out on. -- add on. >> is it possible that apple could on this market? >> yes. >> what do they need to do that? >> have a value position. explain why people should change.

>> what does the future look like for mobile payments? >> over a sustained. od of time, under the credit card will get smarter and have the funds alley of this, or this from shelley will subsume this option alley. >> what about electing it to a royalty -- a loyalty program? >> they are moving towards that with passbook already. >> are people using that? >> how many people have boarding passes, and how many people have their phone? when you get a home depot gift card, you can just take a picture and bring your phone. they are a value proposition. when it comes to loyalty cards, i have a shoebox in my closet cards --ruit and flyer frequent flyer cards. if they can make a backend for all of your loyalty cards, i think that's the kind of value position he is talking about.

cory, do you use passbook? >> i do when i travel. when you talk about payments and what apple could add, the notion you have is this biometric sensor for identification built into the phone. ,he way we see more businesses small businesses in particular, using the ipad as a cash register -- you can see a lack of fortune. they take away some of the risk through this fingerprint id. they can help make that transaction happened between an iphone user and an ipad business. it is much in the same way that we see businesses like uber, where the suit was -- or the service provider and the consumer use the same technology. apple is in a strong position to do that. with more and more small businesses using the ipad as a cash register, when they enter a payment, they are in a very strong position to guarantee the

security and identity of those users. perhaps offer to the merchant a lower processing fee that they can't get from visa and mastercard. they are in a very strong position to do so. >> still no word yet about payments from cupertino. we are waiting. we will stick around with wires joe brown, keith rabois, and for johnson as well. coming up, we talk about security. will the security features be enough added in terms of a mobile wallet? will this be enough to protect our information? we find out next. ♪

>> welcome back. you're watching a special edition of "bloomberg west," --apple's next generation. tim cook just unveiled two new iphones. >> these of the iphones.

the iphone 6, and the iphone 6 plus. they are without a doubt the best iphones we have ever done. i hope you will agree, they are the best phones you have ever seen. as for how much they cost, the iphone 6 -- $200 to $400 with a contract. the iphone 6 plus, three other dollars to $500 with a contract. is $90ans the iphone and with a contract. the updated security will include a two-step verification process which will send an extra code to a person's mobile phone if a password is entered, but will added password protection will be enough to keep consumers happy?

and how much more action security will he need if i wallet and health care information are added? ,oining me now is keith rabois former ceo of square. he has a lot of experience in security. michael, i will start with you. given what has happened with apple, we know that icloud was hacked -- was intact specifically. trust apple with health information and payment information? >> the biggest issue at hand is user trust. at the end of the day, the users need to feel comfortable that if they are putting sensitive information into the cloud, letting the next into their lives more and more, that they trust without it is going. >> tim cook announced payment, saying it is all about the wallets. business, so huge now we know that some sort of payment capability will be added

to these new phones. keith, what comes to security, can we trust apple? >> we can trust apple. if you look at debit credit cards, it's incredibly nonsecure. secured by open 60 digit identifier and a six digit code, and your signature. when's the last time someone authenticated your signature accurately and carefully? any new product is probably more secure than what people use every day on every transaction across the united states. >> the rest of the world uses chip and pin. is the united states are going to get there? >> they will probably use chip and signature. to do tooes apple need be vigilant about protecting this information? users are going to be trusting apple. >> they need to move away from just the password as the measure of authentication. it's not a usable security feature. >> is finger print good enough?

>> it certainly the right move. the two factors they are pushing towards our good move if they can make it usable so that we have lots of users using it. saying afterwards that you could have been protected isn't a good answer. >> what else could they do? >> they can work to prevent fraud on their side. the attacks they are facing are advanced. they will face people doing automation, and all sorts of forms against a variety of accounts. they will face very targeted attacks against individuals. thinking through how they seamlessly can protect users without impacting users, because at the end of the day if you make security so tough for the user, you have lost. you're not protecting them, they just go elsewhere. >> they are now saying credit and debit are not safe. you have a lot of experience working with fraud from paypal. how hard is it you are the guy the backend? a is difficult to make consumer friendly product. deliberating fraud isn't that difficult. you can make an airport

privately secure, just incredibly inconvenient. the same thing is true with payments. thatu want something people can easily and frequently use, it is very difficult to make that secure at the same time. there's a trade-off. >> is a fingerprint convenient enough? >> i think it is. it's a feature that people actually relish. i can't use my ipad anymore, because it doesn't have a fingerprint sensor. i'm used to unlocking the device with a thinker print censor. >> it is called apple pay. is apple more or less secure than other companies? >> i think they are attracting the right talent and taking hard about the problem. it's not an exercise that is simple by any means. when you have the top talent working on a problem, i think if anyone has a chance, these types of companies do. that it is a big uphill battle. >> what are the chances that apple pay will revolutionize the way we pay for stuff? details.iting for i think they've done a good job explain what is broken in the

system, that is easier to explain than to fix it. they know the problem, lets you with the solution is. >> if retailers don't have the hardware, how quickly can we use this? >> i suspect it will be usable very fast. >> we heard reports about partnering with nordstrom's and other retailers. we will watch for that details. more headlines coming from apple as we speak. michael, thanks so much. keith rabois, you are sticking with us. we will be back with more on apple and their big event in cupertino, coming up. can apple's new wearable device really go mainstream where others have failed? ♪

>> will come back to "bloomberg west," i'm emily chang. as is our special coverage --

apple's next generation. apple just unveiled two new iphones. they are bigger, they are supposedly better, they can supposedly track health statistics and help you pay for stuff. this is phil shiller on stage. >> 38% more pixels. the six plus -- 100 85% more pixels. huge displays, packed with pixels, but here's the real magic. they are done in phones thinner than anything we have ever made. [applause] >> let's take a look at who will buy these new phones. who will buy in iwatch? google wanted google glass to be mainstream, and it is far from that at this point. joe brown from wired is back with us, as well as keith rabois , formally of the paypal mafia. about this apple pay situation.

keith, what is your take? it will work with think of recording technology. nfc has not been mentioned specifically. >> not to easily retrofit into pre-existing terminals. i expect that is the underlying to quality for now. >> you can add a credit card with a camera. >> i don't know that is game changing technology, but that is cool. >> who will buy these new phones? who will buy the watch? >> they haven't talked about the watch, but i think the phones -- everyone will live. between the models and the pricing, the dolly proposition -- it will be incredible. people divorced the specs from the user experience. i think they will sell like hot cakes. >> apple pay works with visa, mastercard, american express. >> we think of a phablet infringing on tablet territory. the reason is because tablets are expensive. when you have someone who is able to buy a gadget for $200,

with this many pixels, the ability to have a do it all advice, for people who aren't oluxurious, this is a good value per position. the ability to have your kid watch frozen while you are driving then is different than buying an ipad for that purpose. >> is apple cannibalizing its own market? that's in my thesis on the long, i think that's exactly what is happening. it's a conscious decision on their part. it's one of the reason they have been migrating to larger ipads. anticipation of these coming iphone products. it was inevitable, driven by what consumers were doing. as evidenced by the declining order to quarter ipad sales. this was something that had to happen. i think the weird thing that might happen -- consumers

migrate upmarket to these larger iphones, and it opens up a whole bottom market for some thing about roger wrist. it's a weird transition where people will look for a smaller device again. with subway,works staples, whole foods, target, also various banks. fargo, america, wells also available at the mcdonald's drive-through. >> i think it's fascinating that apple is selling this on a basis of fear. if you talk about how they are framing it, they are talking about all the things that go wrong when you use a credit card. they are talking about how you are not providing your credit card, your name, your address, to anybody at these institutions. that's a big value proposition. that is actually a hallmark of the old paypal value proposition online. you could use your paypal account instead of providing financial or personal details to the end merchant.

it is surprising to me in the real world at that is a serious fear. however, with a lot of the recent scandals and targeted attacks, i think maybe this will resonate. it is interesting to see apple, generally a high value proposition company, selling on the basis of fear. >> i'm afraid. >> afraid of what? >> afraid of getting your card stolen. i was a victim of the target breach. -- it is happening so often at this point. >> if this phone can do all this stuff, do you need a watch? >> the watch will be a different product. i'm calling it a fashion item a. -- theh the purpose purchase of beats, they are becoming a fashion company. >> the event is still going on. we will be back at the top of the next hour with more from

apple. ♪

data live from pier three in san francisco, welcome to "bloomberg west." i am emily chang. we want to welcome you back for special coverage of apple's big announcement, shall we are going "apple's next-generation." tim cook is announced that one more thing, and that one more thing is as much -- is a smart watch. i want to get back to our editor-at-large, cory johnson, at cupertino. >>